Multi family units in Denver

[Josh Keys]

Is anyone able to offer any advice on the above? I know that the returns may not be be as high as other areas of the US but if anyone could guide I would appreciate it.

As an example, looking at a duplex in Aurora for $115k

Gross rent $14k
Taxes 1.5k per year.

[Uwe S.]

Originally posted by djjk1:

... I know that the returns may not be be as high as other areas of the US ...

When you buy these house complete with your own money, then you have a liitle return yes. But if you buy these houses with a mortgage you have no return for the next 20 years.

I hope my 2 cents help you to decide.

-Uwe

[Josh Keys]

Thanks Uwe.

I think the 50% rule, along with the relatively high purchase cost makes this a tough one unless I could find a way to bump up the rent.

Any other thoughts?

[Jeffrey K.]

It depends what you want to do. You dont have to pay asking price also. I think this could work. I dont make $100 per door in the nice areas in Milwaukee, but I end up doing alright by doing other types of deals.

[Uwe S.]

Jeffrey,

I believe djjk1 is a beginer like me, so I guess these little money flow is to low for him.

When you have 20-30 or more units, then is the cash flow of the next 2 units not so important, but in our case we need min. $120 per door ;).

-Uwe

[Jon Holdman]

Your figure of $14K gross rents is, I assume, the entire place. That's only $583 a month per unit, $1167 total. No way is that worth $115K.

Those are very low end rentals. A small 3/1 there is going for $900 or so (I have one). A 1/1 in one of the numerous apartment building is $500. I wouldn't buy duplexes with 1/1s because there's so much competition from these apartments.

Aurora has become very competitive in the good rental areas. Tough to find a deal there.

[Josh Keys]

Jon, in your experience what areas of CO do you believe I will have a better shot at finding a good deal?

Uwe - you are right, I am just starting out! Thanks all.

[Jon Holdman]

Good deals take a lot of work no matter where they are. I don't think there's anywhere here you can easily find good deals. With a lot of diligence and searching, you should be able to do better than this one. PM me if you want a few ideas. Its already too competitive.

[Eric Byrd]

dj, if you can expand outside of CO, there's a lot better deals...

I would advise you look at your numbers 1st. Once you start reviewing the NOI - Net Operating Income vs purchase price, you will get a feel for what you can do or can't do at 1st glance. 115k purchase price for probably a NOI of $7k-$9k/yr without debt service can't work. Use Cap rate, which is NOI divided by purchase price. I'll use 9k/115k= 8% cap rate. You would need a loan of less than 8% to make a little money on this deal. If you purchased it outright, you can still make more than 8% on a $100k investment.

You can probably do better if you keep looking as Jon stated. Keep in mind, you try to buy into a property right, which most of the time makes your exit strategy easier.