Good question! Short answer: property and mortgage values and cash flow.
Longer answer: it’s a function of the dymanics of the city. As someone looking to buy rental property myself, here’s the analysis I use in looking at this. If you want to buy a $150,000 home, as an investment, you need 20% down. Let’s assume $1000 a year in insurance and another in taxes.
For investment purposes then, this home is going to cost a $30,000 down payment and at a 4.5% APR, cost a landlord $777 a month to pay principal, interest, taxes and insurance.
A landlord is going to need cash flow, too, to be prepared for emergencies and have a return on their investment. In this case, that $150,000 3 Bed, 2 bath home may rent for $1000 or $1050. This isn’t profit for the landlord, necessarily, as there are taxes and maintenance of the home involved, too.
It scales from there…a $175K home requires a 35K down payment (as an investment property) and costs $878 a month to carry in this scenario.
LARGE CAVEAT: This is for a 20% conventional loan, investment property. An owner occupied home will require much less down but have a higher overall mortgage as a result.
Looking to buy or sell a home in Colorado Springs? Please call Rob at 719-440-6626 or email me at email@example.com.
*Reprinted with the permission of the party whom asked.