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Colorado Springs Real Estate Investing

As the Colorado Springs real estate market continues to grow with new homeowners, relocation transplants, PCSing military, and the ever growing rent rates. More and more people are considering a move into real estate investing. Which is great, the only problem is not everyone is educated enough to make a cash flow decision or prepared to be a landlord. Don’t get me wrong, investing in multi-family housing is awesome, but you need to understand the numbers.

Passive Investing vs. Active Investing

-Passive investing is a strategy  where you find rent-ready turn-key properties that produce cash flow from day one. I really like this strategy because it requires less money and less skill. This approach is all about cash flow.

-Active investing is a strategy where you find a deal, fix up the property, rent and manage it yourself. Also a good strategy, but requires more money and more experience and skill.

Today we are only talking about Passive Investing. Searching for the best cash flow! To really dig deep we will start our journey of investing into cash flow by analyzing a duplex. Click Here for Investment Properties for Sale in Colorado Springs.

Duplexes are great as an investment for a few reasons, but the biggest reason is multiple streams of income…More doors, more income, less stress about occupancy! Duplexes are also a great way to get started in real estate investing.

For this example we are buying a duplex in Old Colorado City with an asking price of $250,000.

First thing we need to think about is how much money we need as our down payment. Most banks and mortgage companies will want 20% as a down payment. (Get Pre-Approved) For this example we will put 20% down, which is $50,000. If we are financing $200,000 our monthly payment (P.I.T.I) will be about $1000. The payment will change depending on the interest rate. But we will actually need more money…we will need 6 months of P.I.T.I in reserve (principal, interest, taxes, insurance), $6,000. We should also think about having a slush fund for future repairs on the property, $1000 per unit. So, in total we will need $58,000 in total available cash. 

The second thing we need to do is analyze rent roll, expenses, cash flow and NOI. These numbers can make or break you on a rental deal, if these numbers don’t make sense move on and keep looking.

For example the duplex in Old Colorado City, Unit A is rented at $850 and Unit B is rented out $775. Both units pay their own utilities (gas, water, sewer, electric) and you pay for trash.

We are receiving a total of $1,625 in gross rent and we pay out $30 per month for trash. Gross rents-expenses=NOI (Net Operating Income) Our monthly NOI is $1,595, but we should always look at yearly numbers. NOI $19,140 yearly…

Next we need to find out how much our cash flow is, NOI-Mortgage=Cash flow! $19,140-$12,000=$7,140 annual Net Cash Flow. From our original $50,000 we used as our down payment our ROI is 14.28%!

Isn’t it beautiful! We need to keep in mind this is a realistic scenario. But not all properties are going to cash flow like this one.

You will also need to plan for vacancy, potential HOA, and if you plan to have it managed by a property management company. Just some more variable expenses to think about.

Last thing you need to do is Contact us! We can help with your first, next or last real estate investment. We have strong local market knowledge to help you find a great cash flowing machine.

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