Multi-Family Metrics in the Denver Market

[Marc Allen]

Hi All,

I'm relatively new to the Denver area, and very new to the Bigger Pockets forum. I've been keeping an eye on the Denver market for the last 6 months or so, and I've got a few questions for active investors in the market. Primarily, I'm interested in whether others are actually seeing many listings where the numbers work relative to standard buy and hold metrics. By that I mean 

• Rent >= 1% of purchase price
• Positive cash flow assuming
  • Conventionally financed properties 20% down
  • 50% rule or full estimates for operating expenses

I know that many of the best deals never hit the MLS, but I'm not seeing anything close to numbers that actually work. This leads me to believe that either everything where the numbers work are being snapped up before they hit the MLS, or that folks are buying multi-families that are not meeting the 1% rule, and/or are just barely breaking even with the hope that the market will continue to appreciate at a higher than average clip, or that rents will continue increase in the way they have the last few years. I'm seeing much of the same on the SFH market, but it makes a bit more sense there, because given the influx of new residents, and the limited inventory, we're competing with buyers looking for primary residences and the numbers don't need to work out beyond whether they can afford the payment.

Just curious what others are seeing. I'm looking to purchase a 2-4 unit property this year, but at this point I'm likely to stick with the Chicago market (my native market) where I'm still seeing Rent/Purchase at rates of around 1.5% and cash-on-cash return >= 15%, despite much higher property taxes.  My primary focus is cash-on-cash return, and I personally have no interest in gambling on continue appreciation or rents increasing at the rates they have the last few years here in Denver.

Looking forward to hearing from others on this topic.

Thanks,

Marc