A Good Potential Cash Flow Property in Fort Collins

Investment Property for sale in Fort Collins

This morning I went through a foreclosure listing at 801 Bitterbrush Ln today with another broker in our office.  We were impressed with what we saw and I thought it’d be a great first hand example of a potential investment property in Fort Collins.

Background Info

This home is within a 1/4 mile of Front Range community college, has 2 bedrooms, 1 bath and is 847 sqft. It also has a 2 car garage, a nice fenced in yard, and sits on a corner lot.  It is VERY clean compared to other bank owned properties. Did I mention the bamboo floors in the living room?  At $139,900 it’s going to be hard to find a home in this type of condition in Fort Collins.  Most single family homes are going to need quite a bit of work.

The Numbers

Now here’s where the fun part happens.  You’re probably thinking, okay that’s great, but how do I know it’s a good investment.  Well let’s run the numbers. For this example, we’re going to assume you buy this property with 20% down, secure a conventional loan at 4.5%, and are able to charge $1,000/month for rent. ( I know of 2br. apartments going for $1,000/mo. right now)

So pretend you’re the potential investor.  You make an initial investment of $32,177 (20% + $4,197 closing costs)  and for the next 5 years get an annual 9.33% return on your investment.  Sounds pretty good huh?  Also, even better this number already factors in paying a property manager 10% each year and paying 6% to sell the property after 5 years.  Don’t forget, we also assume you buy the property for list price.

To improve your return, the first place I would start would be to ask for closing costs on this property.  Just this ~$4,000 discount would bring your initial investment down to $27,980 and increase your yearly return to 12.15%.


purchase price


land 20% $27,980

house 80% $111,920

down payment 20% $27,980

closing costs 3.00% $4,197

total initial investment

loan amount 80% $111,920

loan terms

term 30 years

interest rate 4.50%

monthly PI

mortgage insurance 0.00% $0.00 per month (percentage is annual renewal rate)
total monthly payment . $567.08

annual interest
$4,826 (averaged over holding period)

rental increase per year

monthly rent

average monthly rent
$1,026 (averaged over holding period)
annual rent
$12,000 (gross scheduled income)
average annual rent
$12,308 (gross scheduled income averaged over holding period)
vacancy allowance 3.0% $369

annual operating expenses

property taxes


utilitities $- $0

maintenance 6% $738 (percent of gross scheduled income)
management 10% $1,194 (percent of gross operating income)
HOA $- $0

2nd $- $0


FYI Total Monthly payment and HOA


total operating expenses

investor tax bracket 33%

holding period 5 years

annual appreciation 3%

cost of sale 6%

reinvestment rate 2%
(before taxes)

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gross scheduled income

less vacancy allowance

gross operating income

less operating expenses

net operating income

less annual payments

cash flow before taxes
$1,669 per year $139.12

cost recovery (depreciation)
27.5 years
annual recovery

principal reduction
$1,979 (NOT deductible)

taxable income or (loss)
($421) (cash flow before taxes less cost recovery)

tax savings
$139 (taxable loss times marginal tax bracket)

cash flow after taxes
$1,808 (cash flow before taxes plus tax savings)

projected sales price
$158,284 (from annual appreciation and holding period)
sale cost
$9,497 (projected price times estimated cost of sale)
net sales price

adjusted basis
$123,748 (initial price plus closing costs less total annual cost recovery)
taxable gain on sale

capital gains tax

cost recovery 25% $5,087 (tax on gain from cost recovery)
non-cost recovery 15% $703 (tax on remainder of gain)
total tax due from sale

after tax proceeds

net sales price

mortgage balance

taxes due

net after tax proceeds

cash flow after taxes

net accumulation 1.34%
(after tax reinvestment rate)
amount accumulated

wealth position
$50,260 (net after tax proceeds plus accumulated cash flow)

yield factor
1.56 (ending wealth position divided by initial investment)
after tax annual yield