Ontario, CA · Member since 2014 · 15 posts · 1 vote
HI BP,
I'm looking for some guidance in purchasing a rental property(s) that will provide some passive income. I would like to purchase something in Denver or Colorado Springs, CO. I am open to other areas in the USA. I'm just looking for a trusted situation or company to help me get started. Does anyone have any suggestions?
@Ethan Jensen Welcome to BP! This is a good place for you to start getting your education on real estate investing. I would caution you to keep your money until you have a little bit more knowledge under your belt. There are plenty of people out there that will be happy to part you from your money.
Personally I think people are always better keeping their money closer to home, where you know or can easily get up to speed on the market, know the economy, etc. Every town has their spots that are in demand, and others that are dead, without knowing the area, it's easy to buy in the wrong spot.
There's many investors that are putting their money out there, trusting someone else to make judgments as to the quality of construction, areas, local economies, etc., and many of them are going to be kicking themselves for not checking them out themselves. Just my opinion :) Good luck!
@Ethan Jensen The Denver/Colorado market is very tight and returns are low. If you have the whole country to look at, I would look elsewhere. Why not in Ontario?
. Thank you for the response. Prices are very high here in Ontario, California. I would like to purchase something in the $120,000 range and get 1% income to purchase price ratio, ($1200), higher of course would be better. I would like to purchase the first one with 20% down and the second one in all cash. Any ideas or recommendations for this financial strategy?
. Thank you for the response. Prices are very high here in Ontario, California. I would like to purchase something in the $120,000 range and get 1% income to purchase price ratio, ($1200), higher of course would be better. I would like to purchase the first one with 20% down and the second one in all cash. Any ideas or recommendations for this financial strategy?
thanks,
Ethan
As someone who has been in the denver market for 7 years investing, this is extremely rare in Denver. I've seen some 1% deals, but they are few and far between, especially after rehab.
. Thank you for the response. Prices are very high here in Ontario, California. I would like to purchase something in the $120,000 range and get 1% income to purchase price ratio, ($1200), higher of course would be better. I would like to purchase the first one with 20% down and the second one in all cash. Any ideas or recommendations for this financial strategy?
thanks,
Ethan
The first thought is, again, there are lots of better rental markets in the country than Denver. Why are you fixated here? Second, why would you want to use "all cash"? Third, as Anson mentioned, to get a 1% return as you mentioned, you're either going to have to be lightning fast on the MLS or do direct marketing, or get very lucky.
I guess the goal is to something in the area, so when I drop by to visit with my daughter. She is attending the Air Force Academy in co springs.
Do you have any suggestion of how to find the 1% type properties?
regards,
Ethan
I will add my 2 cents, along with the others. The Colorado front range is a lousy cashflow market. You could have found 1% properties here a 4-5 years ago, but the market here pulled out of the recession a lot faster than other areas. Prices are high, demand is high, inventory is low. The fact that your daughter will be here for a few years isn't a strong enough factor to balance all those out.
If you're set on this market (against all advice, lol) try Pueblo.
BTW, I live in Denver, but am now investing in the midwest.
@Ethan Jensen Not to be rude, but as mentioned above, you're either going to be lightning fast on the MLS (Which @Anson Young uses as one strategy I believe) and by doing so you will be competing with lots of other investors who are local and can look at and offer on properties much faster than you can from far away, or you will have to do direct marketing, which I would think would also be hard long distance. You could also try partnering with someone local if you have cash to burn.
I'll pile on with the others. Five years ago you could have beat the 1% rule. I wish I'd have bought 20 rather than just two. Right now I can't find anything. Other landlords I know are selling to cash in from the high prices. I've considered that myself, but I'm not sure what to do with the money if I did sell. Like Jean I'm looking further afield. Just back from Florida, but the situation is bad there, too.
@Ethan Jensen I realize that some people invest for appreciation in addition to cash flow, so perhaps you are one of those types. BTW investing for appreciation is a very UNBP approach. I think Denver holds some promise in that area but your $120,000 price point is the very bottom of the market. You would be buy a condo for that.
Hi Ethan. I can hook you up in Southern Colorado. Marks' suggestion is wise as well. I would consider Greeley as a sturdy Colorado option. In Southern Colorado I would consider the two at 60k instead of one 120k. So two for 60k that would rent for 1k each vs one 120k that rents for $1200.
Being that you are in Ontario I would put both lower and high desert locations on the table as well as Vegas. You could drive to all of these in short order. So that is Palm Desert to Barstow and don't forget Fontana to Hemet.
Ethan, being in Colorado Springs, I thought I'd give a quick chime in. Basically, supporting what most have said in that getting 1% is very difficult right now. Can it be done, yes, but those deals are quick to be gone. Realistically, your looking in the .7-.8 range, and those deals still disappear quick. Good news is, if you can get one to cashflow, rents are stable here. With all the military, we have a constant flow of military looking for a rental, so occupancy rates are high.
Considering the tenor of the above responses to Ethan's question, I have a follow-up question for those of you in the Front Range area: "What are you doing to make a living up here if the returns are relatively low?" (other than investing in out-of-town markets). I'm curious because investing out of town (or out of state) seems like it would take a bit more time/work that I just don't have at the moment.
I'm certainly very new to real estate. I've been reading a good bit and trying to get educated about how it all works (at least as well as you can before taking the plunge). Like many, I have a day job doing something else and can only devote limited time (maybe 10-15 hours a week) to real estate ventures. I had been working on a very conservative business plan including acquiring some buy & hold and looking for opportunities to flip/fix or wholesale over the next several years. Now that I'm reading how bad the returns apparently are in Denver, I'm wondering if I should rethink the plan.
Do any of you experienced in Denver area investing have thoughts on where the market is going and what a new investor should focus on?
@Dan Perkins and @Joseph Konrad here is my take on the situation. The returns are lousy because there is significant appreciation anticipated. Generally (there are exceptions) what you give up in cashflow is offset by appreciation.
Let's look backward for a minute. I know of a number of properties in Colorado that will easily meet the 2% rule and maybe even do 3% (for every $10,000 invested you get $300 in monthly cash flow). Now that said, those properties are selling for slightly less than they did 20 years ago and rent growth is south of the inflation rate, the population of the county they are located in has declined about 3% over the last 20 years. Conversely, you look at a similar property in Denver and you would be lucky to break even on just the PITI with 20% down and 5.5% financing and that's not even considering Cap Ex, vacancy, management or repairs. The difference being that RE in Denver has tripled or quadrupled in the last 20 years and rents are ahead of inflation.
The thing about appreciation is that it's not as much of a sure thing as cash flow so it is more of a gamble. With leverage and appreciation you can get something that makes the returns generated by the 50% rule and the 2% rule seem like peanuts. The downside is that you have to keep it all together between now and then. There will be downturns where you see depreciation (sale prices decline) and you can really get hurt if you have to sell during one of those times.
@Ethan Jensen I am sure you probably don't desire to look out very far but in the northeastern corner of Colorado, I am getting over the 1% rent to price ratio. I currently only have 2 properties but one is sitting at 1.4 and my second one was at 1.6 but I just raised rent by $50 per month so it is now at 1.7. Might behoove you to look out a little ways, as most seem to be replying.
Thank you for your response and for that matter, all of your responses. Matt, the areas you mentioned, you even like the inland empire and deserts in southern California. Also you mention the southern areas of Colorado. Would investing in areas like Hemet and Barstow, so colorado, have an association with older houses, and possible more upkeep/rehabbing efforts into these property types you recommend? I love the idea of getting the 60k houses, with the income ratios you identified. 1K for a 60K purchase.
I definitely need to check out the NE area of Colorado. I'm starting to realize, you have to basically invest in the boonies, away from the larger cities, to get your higher ratios, is this correct?
I feel like im in your camp. Maybe im in this fantasy bubble, I feel like I missed the train maybe. I also had plans of living in Denver some day. I heard it has an amazing walkability score and very green type demographics. I have worked for the FAA the last 20 years and just looking for some passive income, that can supplement retirement. I was thinking, investing 150K into real estate and seeing how to get the biggest return on that. I don't want to deal with the banks and loans, but if I need to leverage, maybe include a few small loans. But I just want to collect checks. I'm not trying to stock pile cash or be the next Donald trump. : ) To the point/goal. I want to get to the $3000 passive income level, off of my 150K investment and call it a day.
Is there two strategies here? Appreciation on real estate vs. monthly income(rental income)... I want properties that can just cash flow every month. Hopefully the property retains value, +/- 10%. Hopefully break even on +10% side, after closing costs, if a sale is initiated in the future. Building gains through monthy rental income?
@Ethan Jensen the real challenge of getting $1k income on a $60K investment in So. Co. is that you would have to purchase 2 properties for $30k each. It's very hard to find stable renters who can pay $1K in rent. Most with that much income buy. Those that don't are going to be gone in 1-2 years so you end up with extended vacancies and lots of turnover in that price point. The people I have talked to seem to have good success in the $500-$650 price point after buying in the $20K to $30K range.
What's working here now? New development. Lots and lots of new construction. Fix and flipping seems tough because its hard to find starting properties with enough room to turn a profit after all the costs. Rentals seem impossible right now, especially if you're at a distance and must use a PM. Rents at 1% of purchase price will be just about break even after all expenses and debt service. Rents of 0.7% are cash flow negative. May we get more appreciation, maybe we're in a bubble. IDK. I prefer Vegas for gambling.
@Ethan Jensen if you are looking to just collect checks, maybe you could become a private lender; I may know someone who would want to discuss that with you (wink, wink).
@Ethan Jensen Welcome to BP! This is a good place for you to start getting your education on real estate investing. I would caution you to keep your money until you have a little bit more knowledge under your belt. There are plenty of people out there that will be happy to part you from your money.
Personally I think people are always better keeping their money closer to home, where you know or can easily get up to speed on the market, know the economy, etc. Every town has their spots that are in demand, and others that are dead, without knowing the area, it's easy to buy in the wrong spot.
There's many investors that are putting their money out there, trusting someone else to make judgments as to the quality of construction, areas, local economies, etc., and many of them are going to be kicking themselves for not checking them out themselves. Just my opinion :) Good luck!
I might be repeating what other people have said, but no matter where you invest, just make sure the numbers work. Denver and Co. Springs typically don't give numbers that work, unless you are buying and fixing up. It all depends on how much work you want to put into something, but no matter what route you go, make sure the numbers work! (and by that I mean, you profit every month off a property).
hi Ethan, part of my strategy is post ww2 built homes. Southern Colorado has more inventory of pre ww2 but I don't entertain for the maintenance reasons you described and at my price point makes no sense dumping money into a early 1900s fixer. There is a deal in Hemet right for 79k that meets the criteria. Check out castlerockreo for that one.