Denver serviced apartment at $975,000 and $6,345/month — sanity check

[compareTheRidge]

One approach is to judge this by the advertised 7.8% gross yield; the other is to assume the serviced model will eat much more of the income. I’m leaning toward the second.

The property is a 4-bed serviced apartment in Denver priced at $975,000, with projected income of $6,345 a month. I’m allowing for empty periods, management, day-to-day upkeep and future repairs, but insurance and utility exposure still feel uncertain. Financing is another concern because a higher rate could erase a modest operating surplus even if the rent forecast holds.

Which cost would Denver owners stress hardest here: tax, insurance, utilities or turnover? I’d also like views on a reasonable vacancy allowance and the net return needed to justify the risk. Any energy work would be priced by more than one contractor before I included it in the figures.

 

[anika_vale]

Property tax and insurance are the first gaps I’d close because neither appears in your listed assumptions. For a serviced apartment, also establish who pays heat, electricity, internet, cleaning and replacement of furnishings. Those items can turn the 7.8% headline into a very different result. I wouldn’t name a target net yield until those costs and the exact operating arrangement are clear.

 

[nia_sage]

What does the $6,345 represent: a signed fixed monthly lease, a manager’s projection, or an average based on variable stays? That distinction affects both vacancy and management costs. Also, is there an HOA or building charge, and can it impose a large assessment? A sound-looking building does not necessarily mean the unit’s share of future common work is covered.

 

[bea.fable]

The rent being a projection rather than a fixed lease is the detail that would change my emphasis. Energy costs still matter when the owner pays them, but a small drop in the achieved rate plus a few additional empty weeks could do more damage.

I’d first rerun the figures with lower income, longer gaps and heavier cleaning and repair costs. Work out the property’s net operating result before adding the loan, then test several interest rates separately. That makes it easier to see whether the weakness lies in the serviced operation or the financing.

 

[liv_homes]

Annual gross rent is $76,140, so there isn’t much mystery behind the 7.8% headline. The useful exercise is subtracting every recurring owner-paid expense, a realistic turnover allowance and a capital reserve, then dividing that figure by the full acquisition cost. After that, test financing separately at a higher rate and with no rent growth. I’d want a clear margin over my alternative uses for the money, not an arbitrary universal yield.

 

[anika_vale]

Nadia’s question about the rent basis is crucial. My earlier focus on tax and insurance assumes the income itself is credible. Before deciding, I’d request the actual property-tax bill, an insurance quote reflecting the intended serviced use, utility history, the management fee schedule, HOA costs and any planned common work. Then ask the rent forecaster what vacancy and tenant-turnover assumptions produced $6,345.

 

[calm_hearth]

One larger-repair reserve may be too neat for a 4-bed unit. More occupants can mean several smaller replacements clustered together—appliances, furniture, paint and bathroom wear—rather than one obvious event. I’d build a year-by-year cash-flow table with separate lines for recurring maintenance, furnishing replacement and building assessments. If the deal only works when all three remain quiet, the gross yield is not enough protection.