I'm in the process of writing a series of books (for different cities) on the Nomad investing model using Lease Option exits and I was hoping to get some feedback from agents, lenders and investors in Colorado Springs, Colorado.
I did some research and found a property online that is just below the median price, but wanted to see if people think my modeling assumptions are reasonable or if folks in Colorado Springs have any other feedback. I'd be happy to send you a link to the book online if you want to read it or you can find it on my website in my signature.
Initial Home Purchase Price: $234,500. This includes us raising the price by about 2% to have the seller pay for all our closing costs.
Home Appreciation Rate: 3% per year. I did check this on the web and it is conservatively low over a long period of time.
Rents: $1,450 per month. This is technically the rent to a Tenant Buyer on a Lease Option.
Rent Appreciation Rate: 3% per year. This is based on data from the National Association of Realtors, but I'd be interested to hear what people thing about this in particular.
Seller Concessions Percentage: 2% of the purchase price as Seller Concessions to cover Closing Costs which I already added to the price above.
Closing Costs: Seller Concessions we've asked the Seller to pay will cover Closing Costs.
Down Payment Percentage: I use three different down payments: 1% for the first purchase as an owner occupant. 5% for subsequent owner occupant purchases. 20% for properties that we buy as investments.
Loan Interest Rate: 4.5% for all purchases, owner occupant with PMI and investment.
Yearly HOA: $0 per year.
HOA Appreciation Rate: 3% per year.
Property Insurance Rate: 0.5% of the property value each year. For a $234,500 property, that would be $1,173 per year as the Property Insurance premium. The premium would increase each year as the value of the property increases (based on the Home Appreciation Rate we set earlier to 3% per year).
Property Tax Rate: 0.65% of the value of the property for Property Taxes each year. On a $234,500 property that means that property taxes in the first year will be $1,524. It will go up by 3% each year (the same percentage as the Home Appreciation Rate) since the amount is based on the value of the home in that year.
Maintenance Reserve: 12% of the rent each month (on each property that we have rented).
Property Management Rate: 0% for Property Management Rate (we're managing the properties ourselves).
Income Tax Rate: 20% Income Tax Rate. Used for calculating cash flow from depreciation.
Starting Cash: $2,500 so you have enough to buy the first property with 1% down. We'll use the first property to buy additional properties in this particular model.
Years Until LO Closes: 4 years, on average, of renting before the Tenant Buyer purchases the property from us.
Option Fee Percentage: The model is based on holding out for a 5% option fee before allowing a Tenant Buyer to move-in. This does get applied toward their purchase.
Long-Term Cap Gains Rate: 15% on the gains when we sell properties to Tenant Buyers.
Depreciation Recapture: 25% on the Depreciation we took while we were renting it when we sell the property to Tenant Buyers.
Inflation Rate: 3% as an inflation rate. Used to show what dollars in the future are worth in today's dollars.
Anything comments or anything else I should be concerned about in Colorado Springs, Colorado? It is not my home market, so I appreciate any feedback. Thank you in advance.
