Finding cash flow in the Denver market with long term rentals?

Question

Hi everyone,

I am brand new to the BP forum. I currently own one STR in the mountains outside of Denver and am looking to purchase additional investment properties. I would like to purchase long-term rentals (ideally in the Denver metro where I live) but am not sure what, if any, cash flow I could achieve.

I am looking to hear the prospectives of experiences Denver investors on what realistic cash flow goal is achievable in Denver in 2024 with a long term rental? I have roughly $600K in capitol to invest. I'd like to stay in Denver if possible because it seems like the appreciation in the Denver market is going to keep going up but if good cash flow is not achievable then I may need to look else where.

Any other guidance or advice on strategy in the Denver market is appreciated!Thanks,

Michael Smythe · Answer

@James Humphrey Class A rentals rarely cashflow for the first 3-5 years.

Class B may cashflow within first 1-3 years.

Class C should cashflow from day one.

Class D - stay away!

Jay Thomas · Answer

You're totally right about Denver's appreciation—it's been impressive, but it's also driven up property values, making it tough to find good rental yields, especially with a $600k budget. With property taxes and insurance on the rise, some investors are even seeing neutral or negative cash flow at the start. But hey, don't worry! There are ways around it. You could try house hacking, living in a multi-unit property and renting out the other units to cover expenses, or look into areas outside the core like Aurora, Lakewood, or Westminster for better cash flow opportunities. And don't forget about duplexes or triplexes—they often bring in higher rents and better cash flow. Plus, teaming up with a property management company can help find reliable tenants and maximize rental income. Just remember, while initial cash flow might be lower, Denver's still a hot spot for long-term appreciation, and its rental demand means you shouldn't have trouble finding tenants.

Travis Timmons · Answer

Agree with @James Carlson - we all start out chasing cash flow and then watch a property go up in value 6 figures over time and realize that cash flow could never compete with that. You can do basic math and figure out that long term rents just don't work in Denver unless you want to put 50% down. I'd advise you to do whatever you can to own Denver real estate rather than going out of state to chase cash flow.

James Carlson · Answer

You've got a pretty good handle on it. With current prices and interest rates, you're not cash flowing with LTRs. (You can do it with STRs, and Airbnb is mostly what I'm seeing with my investor clients.)

But we were breaking even with our first two or three rentals in Denver as well that we bought between 2015 and 2017. We've furnished them and do medium-term rentals. Now, 7-9 years later, we're cash-flowing about $500/mo after all expenses. And the values have nearly doubled.

To me, appreciation is where the real wealth is built. And doing whatever you can to cover costs make a few bucks while you hold it is just icing. But it ain't the cake.

My take, at least.

Diego Cardenas · Answer

Hi James,

First time posting, but long time investor in the Denver market. I have always found cashflow properties are very achievable in the Denver market, as long as you dont focus on the MLS. For both myself and my clients, I focus on fixer uppers near key educational institutions and also in cities that are STR friendly. Once purchased and repaired (with a HML) we refinance with a long term loan or a DSCR loan and obtain quite decent cashflow while enjoying the appreciation Denver offers. And as an added bonus, for now you can still take partial advantage to accelerate your depreciation.

Ben Rhodin · Answer

Hey @James Humphrey!James Carlson covered it pretty well below. Denver has never been a "cash flow" market. Especially as of late when rates and prices are high. I would also point out that the idea of Cash flow is very subjective, if you buy something in cash, yes it will cash flow, but it will be a very low ROI. So it all depends on your leverage position.

We have still been able to find cash flow on LTRs here in the Denver metro and surrounding areas, however, it usually involves a big value add, or buying a very poorly operated 5+ multifamily property where you aren't competing with homeowners or house hackers. If you want to create the cash flow and high returns, you have to be willing to put in the effort and do what others wouldn't do.

The other options are in the creative financing space, either seller financing, or sub2, these options also can provide a sustainable cash flow model, because you are getting below market terms.

I never like to hear that cash flow doesn't exist, as it's not true, it's just tougher to find, and you have to be willing to work for it. Nothing good comes easy, and as James also pointed out, in the long term Appreciation is what truly will propel you to wealth, not cash flow. But you can find things in Denver that will cover its own cost, or kick off some cash flow even in the LTR space, as long as you buy right.

Finding cash flow in the Denver market with long term rentals?

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