Understanding Current Market & Expected Returns

[Steven Pesavento]

Hi BP, 

I'm working on analysis for a few different markets that our on my list, as I'm looking to move to settle in a new area. 

My two questions are: 

- What type of CapRate, CoC, and other key performance numbers should I expect or look for in the Denver Metro area? If they are dramatically different by neighborhood, where are the best places to find this type of info?

- What areas in Denver are over saturated, or look like they are primed to grow? 

I previously lived in Boulder for a few years, and am kicking myself for not being ready to pull the trigger when I arrived. But now that I'm in a more educated position, I wanted to reach out to the forms to see your thoughts // advice. 

Thanks in advance! 

[Scott Trench]

I've been looking at multi-families in the $400-$1M range lately. I think that typically you are going to see a gross yield on these properties in the 5-8% range where gross annual market rent might be 5-8% of the purchase price. These numbers are for duplexes, triplexes, quads, and slightly larger multis that you'd find on public listings within the city limits and within a few miles of Coors Field. 

Can you do better than that? Sure can. But likely not without some significant hustle, networking, marketing and positioning yourself as a cash buyer that can close in a hurry. I think if you are largely a retail investor, that kind of gross yield is what you are going to see. What are the Operating expenses on these properties? I'm not quite sure - for me, I'd be moving in and operating the property myself until I raised the rents, improved them, or market appreciation did its job and produced cash flow capable of funding passive management, so I'd be cheating a little bit in this market. I don't have enough experience in my two years in the game here in Denver to feel confident in giving you a Cap Rate on these types of properties, and believe that I can create a lot of value with my own active management and hustle.