Another guy just starting out

[James Heiberg]

hey all, just getting my head out of the 9-5 mindset and looking to expand to real estate - I am initially very interested in cash flowing opportunities in Denver (or relatively nearby, up to Ft Colins Dows to Col Springs) - but am concerned they don't exist - would love feedback/advice/etc - also very open to cosmetic fixes with an acqiuisition but house hacking is not in the cards (at least not right now).....

[Logan Laperriere]

Hey James, 

Welcome to BP!

I recommend attending some local meet ups and networking with other local investors. With interest rates being higher over the past couple of years many rental areas are struggling for positive cashflow. Have you considered investing out of state? Check out the Events and Meet ups section for events in the Denver area. Good Luck with your search!

[Kelly O'Keefe]

@James Heiberg

Welcome to the site, there is a ton of resources on the site for people in Colorado. They also have a couple meet ups in Denver you could try.

[James Carlson]

@James Heiberg

You're not totally wrong. Denver, Colorado Springs, the entire state of Colorado really is pretty tough to cash flow right now.

There are ways, but it's more money up front finding a property that needs work. You can juice the numbers a bit by doing medium-term or short-term rentals. But at the end of the day, most markets in Colorado are long-term buy-and-hold type places. I tell my STR clients during intake that A) they should have a long horizon and that appreciation over 10, 20 years, is your biggest asset and that B) they should want that vacation rental also for personal reasons, not just investment.

What prevents you from house hacking right now? I only say that because if you don't already own your personal residence, I'd start there. I don't like going out-of-state on your first buy, but if you are laser focused on cash flow that's probably your best bet.

I wish you the best.  

[Dan Guenther]

@James Heiberg - Welcome to the community! 

Cash flow is hard to find these days but it does exist and deals are closing every day in Denver :) 

It's going to depend on your risk tolerance and life situation in general but if you are willing to think outside of the box, then you will definitely be able to make your start in the investing world. Reach out if you want to talk more about investing in the Denver and Northern CO markets.

[David Mackin]

@James Heiberg The mindset I am seeing in Denver right now is looking for a property that may not cashflow AS you live in it, but has the potential to cashflow once you move out and it's fully an investment property. That can happen for a few reasons: you can rent out the room you were living in for more rental income and can rehab some things while you live in it.

[Wale Lawal]

@James Heiberg

It's fantastic that you are looking at real estate prospects; Denver and the neighboring areas have a lot to offer. Opportunities to generate cash flow can be identified, but they could need thorough investigation and thought. Here are a few pointers and counsel:

Perform in-depth market research in Denver and the surrounding areas. Recognize the employment growth, economic considerations, and trends in the local real estate market. Investigate the details because different neighborhoods could provide different options.

Examine the demand for rentals in the neighborhoods that interest you. Take into account elements including neighborhood desirability generally, employment prospects, and population growth. Strong rental demand indicates a higher likelihood of cash flow possibilities in the area.

Consider the potential cash flow of any prospective investment property while evaluating it. Compare the rental revenue to the costs associated with the property, such as taxes, upkeep, and administration. Make accurate financial estimates to make sure there is a positive cash flow from the property.

Make connections with Denver area property managers, investors, and real estate agents. Through networking, one may learn about the market, possible transactions, and the best ways to invest locally.

This may be a really effective tactic to increase value if you're willing to consider homes in need of minor repairs. Seek out houses with potential for renovation but that other purchasers would pass over because of their current state.

Learn about Colorado's landlord-tenant legislation and municipal ordinances. Comprehending the legal environment is essential for effective property management.

If at all feasible, try to locate a mentor in the Denver real estate market who is experienced in the area and can offer advice. Getting knowledge from someone with local experience might be quite beneficial.

Remember that identifying the best investing prospects requires patience and in-depth study. Despite the competitive nature of the Denver market, smart approaches might nevertheless lead to chances for cash flow. I wish you the best of success as you pursue Colorado real estate!

[Zak Cooper]

Welcome to the site James! I am fairly new, but one thing that has helped me so far is typing in my city of choice and finding people who are recurring names and trying to connect with them. 

Additionally, someone has created a post about any topic you can think of. Just search and study :)

I hope this helps and best of luck on your journey James!

[Michael Smythe]

@James Heiberg Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

When investing in areas they don’t really know, investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

Our OPINION for the Metro Detroit market (always verify each area for yourself!):

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

[Sophia Buesing]

Hey James! Welcome to the forum! Would love to connect we do a bunch of REI happy hours in Denver.

[Jeff White]

@James Heiberg Welcome to the forums James, you are in a great place!

It is challenging to cash flow in the market today with high interest rates, high purchase prices and properties that don't "on paper" cash flow.

What you need to do is think a little more creatively, if you really want to cash flow, you need to consider alternative strategies besides just renting to a long-term market tenant since that is extremely difficult to cash flow.

Instead, you will have to consider utilizing short-term, mid-term and even Section 8 strategies. 

For example, Section 8 is a fantastic strategy where the local housing authority pays above market rents by bedroom count. Thus, you just need to find a investment property that has the right price and bedroom count and you will know exactly what rent you will get. 

It really is that simple, but most landlords don't consider the strategy because it isn't as sexy as Airbnb or renting to travel nurses. Nothing wrong with those strategies but those require additional capital to furnish it nicely, and with Section 8, you don't have to furnish it, and you will achieve higher than market rents. 

For the right investor, it is a win-win situation. 

Best of luck, it is still possible to cash flow, the only difference is being flexible with alternative strategies. 

[Tanner Lewis]

From the lending side, I am seeing a lot of cash flowing short-term rental deals in Colorado, but not many LTR deals. If you are looking for cash flow in your market, I suggest looking around on AirDNA and seeing if any of those deals make sense.

[Eric DeNardo]

@James Heiberg,

Denver is a hard market to cash flow at the moment, however, some investors I work with are using the Rent-by-the-room strategy to cash flow. 

[Tanner Lewis]

Quote from @Eric DeNardo:

@James Heiberg,

Denver is a hard market to cash flow at the moment, however, some investors I work with are using the Rent-by-the-room strategy to cash flow. 

Just keep in mind that if you are looking to pursue rent by the room, a lot of these deals will be ineligible for financing. You would have to qualify with the current/market cash flow and then pursue this strategy post-closing.