Aurora Rental – A Portfolio Building Block – Case Study

This property was discussed in our 2019 June Monthly Roundup.

Property Details

  • 3 Bedroom
  • 2 Bathroom
  • Sold Price: $190,000
June 2019 Aurora Rental Location

Features

Love them or hate them, but attached homes with HOAs are still providing the best straight investment opportunity in the Denver metro area. This condo required some cash for initial repairs to get it rent ready, the largest expense being a new air conditioner unit. Other than that only some minor paint and touch up work was necessary. HOAs fees also reduce the amount of cash that needs to be set aside for repairs and maintenance along with reducing insurance costs.

Financing

June 2019 Aurora Rental finance sheet
June 2019 Aurora Rental  annual operating expenses

This investor utilized equity that existed in 2 other rental properties to pay cash for this condo. Utilizing leverage is a great way to boost ROI, however, our client’s long term plan is to have 5-6 rental units that are completely paid off to fund an early retirement. Paying cash for a property keeps the acquisitions costs low because there is no need to pay for loan origination costs, appraisals, or other fees associated with lender financing.

Rental Analysis

June 2019 Aurora Rental analysis

Our client started working on the property soon after closing to get it rent ready. He had his HVAC person in the next day while he did the small jobs that were required. By doing so he was able to get the unit rented out in less than 2 weeks from the closing date. Cash-on-cash return is not outstanding but this is because the property was paid for in cash. The 6%+ cap rate is a solid investment for a competitive Denver real estate market.

While this property is not immediately a 1% rental, within the next few years it should achieve that status. This property will provide excellent value to bolster a retirement portfolio that will provide enough cash flow to retire comfortably. The 10%+ 5 year after-tax indicates that this property will sustain its value to our investor far into the future.

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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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