Here are the numbers on one of our latest rent-by-the-room investments in Denver– and yes, it cash flows.
If we’ve talked Denver real estate you’ve probably heard the word “Sherrelwood”. I love this neighborhood because it’s perfectly tucked just off 36 between Boulder and Denver and just west of I-25. It’s also in unincorporated Adam’s county meaning it has all the flexibility of a long-term rental, rent-by-the-room or an Airbnb (due to the pocket of the county it’s in).
The house had some key features we were drawn to.
- It’s a solid brick build with good bones.
- It was listed as a 4 bed / 3 bath, but with room to add two basement bedrooms.
- There is a detached office/room that can be rented out at a 7th bedroom.
- The property already had a kitchenette downstairs.
- No rehab needed, except adding two bedrooms & egress windows in the basement.
- Large driveway and in a neighborhood with good on street parking.
The house was listed at $495,000 and we bought it at $489,000 with 15% down ($73K). With rehab and closing costs the buyer was all in at $93,000.
The property is being managed as a rent-by-the-room, but let’s break down the deal numbers for multiple scenarios.
Download our free calculators to run the numbers on your own properties.
Scenario One: Investor Rent-By-The-Room
PITI: $3,500
Monthly Income: $5,800
Monthly expenses: $1,400
Monthly cashflow: $900
Some notes:
- This is with 15% down and an interest rate of 8%
- The rooms rent between $1,100 and $850 per month – we know this to be true since it’s fully occupied
- Monthly expenses include utilities and a 15% property management fee
CoC: 12.17%
NWROI: 37%
Scenario Two: House Hack Rent-By-The-Room
PITI: $3,435
Monthly Income: $4,950
Monthly Expenses: $550
Monthly Cash Flow: $965
Some notes:
- This is with 5% down, an interest rate of 6.5% and .3% PMI
- In this scenario we assume the house hacker to take on the “worst” room, thus reducing the income by $850/month
- We also reduce expenses by removing the 15% property management fee, since the house hacker will live in the house they will self manage. Note: When the house hacker moves out they will increase their rent by $850 and can hire a property manager for about that same fee.
CoC Return: 26.04%
NWROI: 83%
Scenario Three: Investment Long-Term Rental
PITI: $3,500
Monthly Income: $3,200
Monthly Expenses: $820
Monthly Cash Flow: $-1,120
Some notes:
- PITI stays the same as the first scenario, but expenses reduce by a few hundred as the renter will pay utilities.
- Property management drops by a few hundred as the rental income is lower and property management for a long-term rental is less expensive
- $3,200 is modest rent for the area, but even if you can get a little more rent or self manage the property, you will not cash flow on this one. At best, if you put down 50% ($244,500) then you could breakeven!!
CoC Return: -13.53%
NWROI: 12%
So are there still deals in Denver, yes. Do you have to think creatively? Yes. If you want to crunch the numbers on your own investments – download our free calculators to run multiple scenarios.
If you want to get creative on an investment or house hack in Denver, reach out! Our team would love to show you on-market properties that will cash flow right now.
