Neighborhoods with positive cash flow in today's market

[Laura S.]

Hello! I am new to BP and also pretty green when it comes to investing. I currently live in the north Denver suburbs (Superior), and have been really impressed with how much appreciation I've had in the last 2.5 years since I bought, particularly since I thought I was buying at a peak. The low inventory out here is really great for home values! However, I'm starting to learn that it makes cash flow tricky because of how cheap rents are in comparison.

I have a townhome in upstate NY that I just put on the market, and I expect to go under contract in the next month. I am planning to do a 1031 exchange with the proceeds and am starting to look at properties in the Denver/Boulder area. After checking out a few properties and neighborhoods in Denver (RiNo, Confluence Park, LoHi, and Berkeley) and running some basic numbers, it seems like it will be difficult to find something with decent cash flow.

I'm looking for something relatively turnkey for long-term rental, ideally condos or townhomes. I need to stay under $600K and my goal for the property is primarily to buy and hold. High cash flow isn't a requirement, but it needs to at least be positive! Haha. I've read a lot of the posts in this forum and it sounds like heading down south may yield better cash flow, but I would ideally like to stay either in Denver or the north / west suburbs, so it's closer to my home. Otherwise, I'm fairly open in terms of location in the Denver/Boulder area.

(As probably a side note, I originally also thought it might be nice to do a condo out in the mountains that I could have as a STR and then use personally some of the time. However, I understand that the market there tends to dry up in another month or so as sellers rent it themselves for another year if properties aren't sold by October-ish. I also think that a vacation rental would be WAY over my head with being so new to investing! Unless it seems like a mistake to do otherwise, my thinking was that I'd save up and pursue that option in a few years, when I've had more time to learn the ropes and know what I'm getting into in various mountain towns.)

I'd welcome any suggestions for areas in which to look, resources I may want to check out, etc. Thank you for any help you can provide!

[Bill S.]

@Laura S. so something to consider. The nicer the area, the lower the cash flow. The worse the area the worse the tenant. Figure out what kind of tenant you want to rent to and then only buy the property they will rent. The areas you mentioned are nicer areas and you will have nicer (easier) tenants to deal with. Those areas have good reputations and are places that people want to live but are not cash flow areas. They will typically be "easy" areas. Most people are just happy to secure a property in those areas. The time on market is fairly low as most "reasonably priced" properties sell the first weekend offered.  When evaluating property in a rapidly appreciating market there are other parameters that investors use besides cash flow. Internal Rate of Return is something that people have used in Denver. This takes into account the appreciation and the tax benefits of depreciation. Unless you want or need the cash flow from the properties I don't think you will do much better in our market than those areas when you look at the whole picture.