
This deal analysis looks at a townhome in Colorado Springs. Leah and I were involved in both sides of the transaction, which gave us a full picture of what everyone wanted. This is a great case study because it shows that it’s still possible to find a deal that benefits everyone.
- Listen to the podcast “#87: Double Digit Returns at 5.75% Interest Rate in Colorado Springs” on the Colorado Springs Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
Investor Profile
This was an interesting transaction because I was the listing agent, and Leah was the buyer’s agent. Her clients are just getting into real estate investing. They both work full time jobs and want to add a couple of properties to their portfolio to supplement their retirement down the road.
Investment Property Details
My clients purchased the property in 2020. They recently looked at the equity they gained and realized they could sell the property using a 1031 exchange and get a new build townhome.
Appealing Features of the Property
The townhouse has a great layout for a rental property. It has two main bedrooms with ensuite bathrooms on the top floor, and a half bath on the main floor. It’s a little older, but it’s well built and in great condition.
How the Deal Was Sourced
When my clients came to me to sell their townhouse, I realized it fit the bill of what Leah’s clients were looking for. I reached out to her to let her know, and once both parties agreed on price and terms, we started the transaction.
Property Contract Details
Contract
My clients wanted to sell the property for $250K, which was exactly what Leah’s clients were hoping to not exceed. It’s hard to find a townhome in the Springs for $250K, so Leah’s clients were fortunate to be in the right place at the right time.
Inspection Issues
The property is in great shape, and there were no issues found during inspection.
Property Financing Details
I ran the numbers on the home using the Rental Property Spreadsheet.
Property Overview

The new owners closed on the property in March 2022 and had an interest rate of 3.875%. Their all-in cost for this property was $69K.
The previous owners were renting the property out for $1300 a month. Once the tenants were informed there would be a change in ownership, they decided to move out. This worked out great for the new owners because they were able to rent out the home for $1600.
Property Operating Expenses

There is an HOA for this property that runs $236 a month, which covers trash, roof, and covenants. Otherwise, the tenants are paying for the rest of the monthly utility costs.
The clients are also paying for property management, which costs 10%. Luckily, taxes and insurance come in pretty low for this property.
First Year Returns

The property is expected to cashflow $1200 a year, or $100 a month, with a 4.7% cap rate. Overall, the property’s return on investment is 28%. This is a solidly performing property that’s a great start for these clients’ portfolio.
Adjusted Returns

We all know that interest rates are steadily going up, and things have changed dramatically just since March. If they were to purchase this townhome today, these investors would likely have an interest rate in the high-5s to low-6s, from what we are seeing. We ran the numbers again with a 5.75% interest rate to see how the property would perform today.
With this adjustment, the cashflow drops from +$1200 a year to -$1200 a year, though the cap rate stays the same and the overall return on investment is about 23%. Even though the property would be negative cash flowing, I would still recommend it to clients because of the overall returns.
In the long term, $100 a month out of pocket is a good investment for a well-below median price property in a strong market. Looking at the long-term analysis tab, we can see that they will start to break even in just four or five years.
Conclusion
This is a great property for new investors and will pay off for them in the long run. Even though rising interest rates are affecting returns, our adjustments show that it’s still possible to get a property that performs well over the long term. We encourage clients to play around with the numbers and see how slight adjustments here and there can affect returns.
Connect with Us
If you’re interested in finding your own investment property, reach out to me. I’d be happy to help you put together a strategy and help you start your investing journey.
YouTube Video
Double Digit Returns at 5.75% Interest Rate in Colorado Springs
Podcast (colorado-springs-real-estate-investing-podcast): Play in new window | Download (Duration: 17:02 — 19.5MB)
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