March 29, 2022
Joe Fairless

JF2765: Market Comparison: Appreciation in Denver vs. Cash Flow in Cincinnati ft. Sarah May


 

Denver-based Sarah May and Cincinnati-based host Slocomb Reed discuss in-depth how cap rates and population growth impact the way investors operate in their very different respective markets. A few topics they cover include: 

  • Ideal cap rates. In Denver’s current market, Sarah wants to see about a 6% cap rate when purchasing a value-add property, with an opportunity to sell between 4% and 5%. In Cincinnati, however, Slocomb says investors are seeking to purchase at an 8% cap rate, but will typically end up purchasing in the 5.5%–6% range.
  • Appreciation vs. cash flow. The lower cap rates in Denver mean investors won’t see as much cash flow as investors in Cincinnati, where lower population growth is reflected in its higher cap rates. However, the potential for appreciation is much higher for Denver investors. 
  • Population growth. While Cincinnati is seeing both rent and population growth, the rates don’t compare to Denver, which Sarah says is projected to beat the national average in population growth for the next five years. 
  • Raising rents and increasing property value. Sarah points out that in lower cap rate markets like Denver, incrementally raising rent by even a small amount can result in a big multiple when it comes to adding property value.
  • Three things that will help you succeed in any business. Sarah believes mindset, focus, and follow-up are key when it comes to making it in real estate. That means having the right attitude and perspective, being able to limit your options enough to put all your energy into one pursuit, and following up in order to discover unlikely opportunities. 

Sarah May | Real Estate Background

  • Co-founder of Regency Investment Group, which owns and operates apartment communities. Their business model is to buy older properties that are in need of renovation and/or improved management.
  • Portfolio: 
    • GP of five properties with over 450 units in Colorado, LP of 1,200+ units
  • Based in: Denver, CO
  • Say hi to her at:
  • Best Ever Book: The Go-Giver by Bob Burg

Greatest Lesson: Grit. Stick to it and amazing things will happen. Approach problems with the mindset that there IS a solution and I’m going to find it. Don’t give up even if we haven’t won a deal for a while. Good things are just around the corner.

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