It is halfway through the year and this week I purchased my 14th rental property total and third this year. I am in Northern Colorado and it is getting harder and harder to find great rental properties because our market is going crazy. Colorado has the highest appreciating market in the country and inventory is at all time lows. I have still managed to buy more rentals and they have been great deals. I have definitely had to pay more than I was paying a couple of years ago, but rents have increased as well which has kept the returns similar. Below you can see a video of the property.
Did I get a good deal on rental property number 14?
The rental properties I have bought up to this point have been from $88,000 to $132,000. This is my most expensive property and it needs more work than the house I bought for $132,000. You can see all my rental property numbers on my resources page. I mentioned prices have been crazy in Colorado and that is no different where I am at North of Denver. Our median price in December was $195,000 and in April it was $225,000. That is a huge jump and made me consider not buying anymore properties in the area and possibly selling my current rentals. After analyzing the data I realized I can’t predict the market and I still have a huge advantage when I buy houses since I am an agent and know my market very well. Even if the market does go down, I do not see it dropping much and if it does I will still be cash flowing on my rentals.
I bought this house for $134,000 and it needs about $10,000 in work. Similar houses in the area are selling from $160,000 to $180,000 fully repaired. Even though I paid more for this property than I have my other rentals, the market has been increasing which still makes it a great deal. I think the value is closer to the $180,000 range because it is a five bedroom.
How did I find rental property number 14?
I bought rental property number 14 from the MLS again. All my rentals have been bought from the MLS and it continues to be my greatest source of leads. I have been doing direct marketing to find motivated sellers, but mostly those leads have been turning into listings for my real estate team. The home was listed for $132,000 and I viewed the house and made an offer about an hour after I saw the listing come up for sale. My offer was around $125,000 and the seller countered me at $126,000, which I accepted. Being an agent and making a quick offer was a huge advantage in this situation.
What will the property rent for and what will the cash flow be on this property?
I believe this house should rent for $1,500 a month given it is a five bedroom and our rental market is crazy hot still. I wrote an article about our market a few months ago and if oil prices would affect it. We have a lot of oil and gas drilling in our county and many thought the lower oil prices would cause our housing market to crash. The lower oil prices have done nothing to cool down the housing market and it continues to be hot.
My payment on this house will be about $670 with taxes and insurance included. My interest rate is 4.625 percent on a five year ARM amortized over 30 years. Plugging the rent and loan numbers into my cash flow calculator I come up with $570 a month in cash flow after paying a property manager. These are great cash flowing numbers, but part of the reason they are high is I put more than 20 percent down. My bank requires an appraisal and more fees if my loan amount is more than $100,000. I decided to skip the appraisal and other fees and go with the lower loan amount on this property.
My cash on cash returns are right around 16 percent after accounting for repairs, closing costs and carrying costs while the house is being repaired.
Future plans for rental properties
I still have a long way to go until I reach 100 properties. I am running into some roadblocks that I knew I would hit and changing plans accordingly. The biggest hurdle is my bank won’t give me any more loans until I get my 2014 taxes done and they get approval for more loans. I think once I get my taxes done we can work something out where they will give me more loans. If they stop lending to me altogether I have a few alternative plans I am working on that I will be writing about soon.