Does Denver Real Estate Investing Pay?

Does Denver Real Estate Investing Pay?

We get this question frequently: What can I expect to earn in Denver real estate income from my home rental property in the long run?

When people are considering investing in real estate, especially when considering if they should sell or rent their property, the main thing they need to be considering is cash flow. Below is the process we do, but simplified.

Selling the Denver property questions:

What is the mortgage payoff?

What will the home sell for?

What is the difference?

Renting the Denver Home property questions:

What is the appropriate amount of rent for a Colorado home?

The appropriate amount is not a number you want, but rather what the market can actually bear. A professional property manager should be able to give you this number.

What is the home mortgage amount due?

This number should include principal, interest, insurance and taxes.

What is the HOA cost? Will this number be included in the rent or not?

What other utility costs are there and will they be included in the rent?

Consider: Sewer, Water, Electricity, Gas, Snow Removal, Lawn Maintenance, Trash removal and any others that apply. This is an important number to know because they will be your responsibility if the unit isn’t occupied.

What do you need for a savings reserve? In this number, take into consideration:

  • Maintenance fees. This number should be between 5-25% depending on the age of the house and its condition, including if remodeling has been done or not. Homes under 10 years old will be 5-15% and homes over 50 years of age will be closer to the 15-25% range.
  • Transition savings. This number will be the expected money that will be banked for the time between tenants. A property manager can give you a good sense of your market and how much should be put aside.
  • Property Management fees. These fees are worth their weight in gold. A good property management company will pay for itself in reduced legal issues, better tenants, better maintenance and more.

An example for Denver and Aurora rental home owners

Let’s take a hypothetical example. Of course, this is a simplified example for illustration only and is not advice. For professional support on your unique situation, contact us, a financial professional, and a tax professional.

John and Lisa Jones own a home and are moving out of state and are considering selling vs. renting out the property to a tenant.

Jones hypothetical selling the Colorado property questions:

  •         What is the mortgage payoff? $212,000
  •         What will the home sell for? $300,000
  •         What is the difference? 88,000


This is a one time chunk of money that they will pay capital gains on unless they purchase a new property. Talk to a CPA about how this works.

Jones hypothetical renting the property questions:

  •         What is the appropriate amount of rent? $2200/mo.
  •         What is the mortgage amount due? $1235/mo.
  •         What is the HOA cost? NONE
  •         What do you need for a savings reserve?

o   Maintenance fees. 10%: $220/mo.

o   Transition savings. 5%: $110/mo.

o   Property Management fees. 12%: $264/mo.

Projected Income: $2200/mo.

Projected Expense: $1829/mo.

Difference: $371/mo.

In this scenario, the $88,000 would be returned in under 20 years, and the property will have grown in value. This also assumes the rent NEVER went up in 20 years. So at the end of thirty years the Jones would have:

A sold house that allowed them to get another house that has increased in value OR

A home they are living in that has increased in value AND a rental home that is free and clear of a mortgage payment. Their potential income then increases from $371/mo. to $1606/mo. and this can continue into retirement as a residual income.

There are additional tax benefits and consequences as a real estate investor that you should be aware of that apply in each scenario. They include what deductions are allowing whether you are living in the house or not.

This illustration is for educational purposes only and does not serve as legal or investment advice. Please contact a professional to discuss your specific situation as the numbers could be very different.

Call 720 989 1996 and let us show you how renting a home in Denver and Aurora Colorado pays!

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Maximizing Appreciation with Residential Property Management

Maximizing Appreciation with Residential Property Management

When you buy a rental property in the Denver area, your primary goal is to receive an immediate ROI (return on investment) in the form of monthly rental income.

Most investors find good deals on short sales, foreclosures or fixer uppers. With the help of property management in Denver in the Denver area, you will likely receive more in the form of rent than you pay out for expenses including a mortgage. When you rely on a reputable and experienced property manager to maintain your property, you also receive the added benefit of appreciation over time. After renting out an investment property in booming areas such as Littleton, Lakewood, Highlands Ranch, Parker, Centennial, Cherry Creek and Aurora, Colorado, you will one day decide to sell your rental property. According to a report by CoreLogic, Colorado is No. 1 for home appreciation in recent years. What’s more exciting for property owners is the fact that experts predict home values will continue to appreciate anywhere from 6 to 10 percent each year.

  • Enforcing the lease on your rental property

A residential property management company will protect your home as the asset is by enforcing the lease. When your tenants follow the lease, they are less apt to damage your rental home, condo or townhouse. It’s extremely difficult for most property owners to play the tough guy. A property manager enforces issues such as a non-smoking or no-pet policy that keeps your home in better condition for future resale purposes.

  • Maintaining the exterior of your rental property

Having a property manager means you have someone to check up on your property. Your property manager might notice a roof that’s damaged or stains in the driveway that a professional can remove before it becomes permanent. When you hire a property manager to tend to your Denver yard and home, you are more likely to experience appreciation in home value.

  • Making timely home rental repairs

If no one responds to a tenant’s request to fix a leaking refrigerator or broken pipe, the water damage can cause mold and mildew that dramatically decreases home value. You can have greater peace of mind knowing someone is always on top of problems.

A residential property manager keeps your home in good working order and looking good so that you can turn around and sell it for a profit without having to spend weeks or months getting it back up to minimum standards to sell. At Legacy Properties-PM, we are members of the NARPM, the National Association of Residential Property Managers. For more information on our property management services and advice on investing in real estate in Denver’s hottest communities, please call us 720.989.1996 or contact us.