2nd Nomad Property In Arvada – Case Study

This property was discussed in our 2019 June Monthly Roundup.

Property Details

  • 5 Bedroom
  • 3 Bathroom
  • Sold Price: $430,000
July 2019 Arvada deal analysis location

Features

One of the great things about this house is that was recently renovated and sold as flip by a couple of other agents here in Denver. This worked out well for our buyers because they were able to walk into a house that will require less immediate maintenance and capital expenditures. The new appliances, carpet, and paint should get them through their brief period of residency and their initial years of renting before any replacements need to be made.

Financing

July 2019 Arvada deal analysis financing
July 2019 Arvada deal analysis operating expenses

This is our client’s second Nomad property and they stuck to a financing option that allowed them to keep a sufficient cash safety net and to start planning for a 3rd Nomad property. With a conventional loan, 5% down, and $2,000 in seller concessions they were able to purchase this property for about $26,000. With this financing, $81,500 less cash was needed to close compared to a traditional investment property.

Rental Analysis

July 2019 Arvada net operating income analysis

Comparing to other comps we expect this home to be rented out for about $2,500 a month, in today’s dollars. As rents increase and their mortgage remains fixed the cash flow on the property will continually improve. Once the PMI is dropped off of the loan they will experience another boost in positive cash flow on the property as well.

The $2,015 annual negative cash flow has the ability to be offset by the tax benefits of owning real estate. Supposing a standard 80/20 structure to land value, they are able to depreciate roughly $13,300 per year. Assuming a 25% tax incidence, they could receive $3,300 in tax benefits. Including these benefits, this property becomes cash flow positive with only 5% down. This property will serve as a valuable long term asset and is a great foundation piece to build a Nomad portfolio on.

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Authors
Chris Lopez
Chris Lopez is a Denver area real estate entrepreneur and investor, as well as the host of Bigger Pockets’ House Hackerz and the Denver Real Estate Investing Podcast.
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