Deal Analysis – Investment Property House in Aurora, CO

Buying detached homes in Aurora near the Anschutz medical campus is one of the last areas around Denver to buy lower priced homes that cash flow. These properties make sense because of their low price point, high rental demand and potential for long term upside. Between opportunity zones and three major hospitals, this area has a lot going for it.

This property closed in Q1 2020.

Investor Profile

• Did not want properties with HOA.
• Cash flow today is NOT the main priority. Investor wanted a property that would pay for itself.
• Long term retirement planning is their focus.
• Investor wanted a property in Denver to avoid out of state hassles and issues.
• Sought a property with minimal work needed.

Deal Quadrant: MLS

Read about the deal quadrant and finding Denver investment properties.

Investment Property Details

• Type: Detached Single Family
• 3 bedroom, 2 bathroom
• Location: Aurora
• List Price: $330,000
• Purchase Price: $315,000
• Why we liked it:
  • Great location
  • Near hospitals
  • Had been on the market 75 days

Property Contract Details

• Finding the property: We setup MLS searches based on client’s criteria. At first we analyzed a few properties virtually with the rental spreadsheet. Then we walked properties to compare virtual reality to reality. This was one of the first properties we looked at and realized it was the right fit. Since it passed the ”sniff test” we put an offer in with the plan on doing more thorough due diligence while under contract.
• Under contract:  Below ask and secret sauce
• Inspection Concerns:
  • Minor electrical
• Inspection negotiation outcome:
  • None

Property Financing Details

• Lender: Conventional
• Loan Type: 25% down conventional
• Appraisal: Above asking price!
• Seller Concessions: 0
• PMI: None
• Interest Rate Buy Down?: No

Spreadsheet Rental Analysis

Property Operating Expenses

First Year Returns

Conclusion

This property met all the criteria for the investor! Since they had their criteria defined, they were able to act quickly and find a solid rental property in Aurora. Even with our conservative underwriting, they found a cash flowing property.  The property is running at a 32% operating expense ratio (all the expenses, except mortgage debt), which is right in line with our market rule of thumb of a 33% operating expense ratio. This rental fits into their long term real estate retirement plan!

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