Deal Analysis – Nomad™ in Westminster

Property Deal Analysis Overview

A new investor purchased his first house hack in Westminster. He’s following the Nomad™ strategy to buy a new rental property every year. He may or may not rent out a few rooms while he’s living there. His focus is on building a rental portfolio and acquiring properties. 

This is a great property for a Nomad™ or house hack due to the location, price point and that it has 5 bedrooms. These are “solid base hits” that build wealth in the long run!

This property closed in Q1 2020.

Investor Profile

• New investor who studied various investment strategies and decided on Nomading™ to build his rental portfolio.
• Realistic expectations
• Preferred the north side of town for commute and price point.

Deal Quadrant: MLS

Read about the deal quadrant and finding rental homes in Denver.

Investment Property Details

• Type: Detached single family
• 5 bedroom, 2 bathroom
• Location: Lowell & 88th
• List Price: $365,000
• Purchase Price: $375,500
• Why we liked it:
  • Very well taken care of home
  • Converted garage for added living space
  • Plenty of parking

Property Contract Details

• Finding the property: This property was found on the MLS. Our client did a great job of analyzing deals. We would analyze and then go look at properties. There were multiple offers on this property.
• Under contract:  Above ask and secret sauce
• Inspection Concerns:
  • Roof needed spot repairs
  • Older electrical panel
• Inspection negotiation outcome:
  • Sewer line cleaned
  • Installed a radon system
  • $5,000 credit for panel and roof

Property Financing Details

• Lender: Conventional
• Loan Type: 5% down conventional
• Appraisal: Above value!
• Seller Concessions: $5,000 for inspection items.
• PMI: Prepaid
• Interest Rate Buy Down?: Yes

Spreadsheet Rental Analysis

Property Operating Expenses

First Year Returns

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Conclusion

Our spreadsheet shows a negative cash flow of $3,691 per year after he moves out. We always underwrite our properties conservatively to include property management and long term rental rates. If the investor opts to self manage, it’s a negative cash flow of $931 per year or less than a hundred dollars per month. In our book, if it’s plus or minus $1,000, it’s a break even property from a cash flow perspective. If he chooses to rent room by room when he moves out, then he should be in the positive cash flow range of $2,000 to $4,000 per year!

Overall, this is a solid investment property for a first time Nomader™. Repeatedly buying similar properties like this will build the investor’s wealth. Hopefully, this is the first of many properties!

Read more about the Nomad strategy and how it works by viewing these case studies on Nomad properties.

Video: Deal Analysis – Nomad™ in Westminster