I'm a fan of Lisa Phillips and her investment strategies, involving buying houses under 35k in stable low income neighborhoods, repairing them to last 15+ years and holding them.
Right now I live in Arvada, nearby to Denver, Colorado, and don't make incredible wages over my cost of living. That is to say, savings leftover from my day job are only about 50% of my income, and my pay is not all that high (30k/yr including overtime). I'm reluctant to put down 10k on a tiny town home for personal residence in my local area, I would much rather make a real investment in a house (no HOA) that can be treated more like a property I own professionally, and less like... Just buying a property for personal use.
However, there are pretty reasonably priced small houses in the Pueblo area, about three hours drive from where I live. In the right areas, it seems like the rental market is healthy there as well. I'm still doing research on property management in the area, and other bits of information as needed, but Pueblo is on the table for me for now. The biggest hurdle would be doing any initial property rehab from a distance, since I wouldn't be capable of driving down to Pueblo to supervise repairs.
So I'm wondering what the experienced opinion would be! Would it be better to almost fully finance a property in Denver, owner occupy and try to build a ton of equity, eventually liquidate and invest into multiple other properties? Or to purchase a less pricey small house in Pueblo, give more percentage down, and have cash flow to turn around into more future investments?
@Kayla Davis your plan looks good on paper. I will say this from personal experience, rehabbing at a distance is a huge pain and much more expensive than you would think. I'm not a fan of investing in Pueblo unless you live there and know the areas. My family had property in Pueblo and finding good tenants is not easy (IMO it has more than it's fair share of gangs and drugs - especially in the cheaper parts). If it were me living in Arvada I would look East and Northeast. I think you can travel shorter and have better returns.
My advise is always stay close to home and buy a du-tri-or 4 plex and let the tenants make your mortgage payment. Your rent payment then goes into the bank for the next place. I think that done right will have greater returns and significantly lower risk than a rehab and rent scenario outside of 30 min from where you currently live.
Pueblo is a puzzler. We were actually just talking about it at the BP meetup last night. It seems like a town that should do well, but it has just never gotten any momentum economically once it stopped being a steel town. But it's got a branch of the state university system, some cool old architecture, the new(ish) riverwalk... seems like a recipe for success, and yet it just keeps not happening. That said, it might be just fine for rentals. And it may be the last hold out, but eventually it will probably give in to the wave of growth along the front range.
Your first scenario (buy in Denver, gain equity, liquidate) actually describes to a tee what happened for me. Of course, as they say- your mileage may vary! I'm not exactly watching the Denver market like a hawk right now, but my impression is that there is actually room for some really good appreciation in the condo market if you by strategically. (I can't believe I'm saying that, haha! Usually I say "don't buy condos" and "don't buy for appreciation" Oh well)
As far as a remote rehab in Pueblo: if you can find a decent contractor and get down there every weekend for a month to keep things on track I don't see it being impossible.
Jean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com
@Bill S is right. I would follow his advice and look for to owner-occupy a 2,3 or 4 plex and use the rent from the other units to cover your mortgage. This will give you practical experience of being a landlord to see if you want to do it or not. It will also be the first piece of your property portfolio. I don't know the Denver area, but you can always get an FHA 3.5% down loan if you have decent credit and good debt to income ratios.
I would connect with @Bill S and also your local Real Estate Investment Association so you can team up with a good realtor and mortgage broker (start setting up your real estate investment team).
God Bless You!
Would you be better off to invest in the Denver area vs Pueblo? Longterm Denver would be better I imagine.
I did invest in Pueblo personally. I would not advise a brand new investor to do Pueblo from afar. I was able to invest in Pueblo after many months of research and after my buddy laying the ground work for boots on the ground from realtor, inspector, plumber, electrician, handyman, PM and attorney.
I was able to get a REO on the good side of town for 30k Jan 2014. I put in 6k(thought is was going to be 2500). It is pretty much turnkey now from floors to roof and rents to a great tenant at $850.
Many homes in Pueblo are turn of the century aged and you will find those homes super cheap. I would think any investor would want post ww2 built stuff so keep that in mind as those cheapos are like buying an old Rolls Royce, looks ok but really is just a massive liabilty. My realtor also has over 20 rentals in Pueblo and that helps with keeping me informed.
From my perspective now, for these low price points, it makes little sense getting a loan. You will pay the equivalent of 12 points just in fees. Most regular big banks will not touch due to dodd frank stuff I guess. Keep that in mind when you do the math. You are on the right track being on BP and asking questions. Feel free to reach out anytime.
Google pic from across the street. It has been painted since. Built in 1954. Permitted steel building made this purchase easier to decide as those are 25k alone.
@Kayla Davis I like both your ideas, so I'm a bit torn. If you had enough cash to purchase an owner-occupied multi-family in your area, that would be my first choice. You get a lower down payment, great interest rates and can manage the extra unit or two from close proximity. I've been trying to convince my wife to try this in Colorado Springs for the last year.
However, if you can't find any multi-family to get into in the Denver area, Pueblo is not a bad place to learn real estate. Houses are obviously cheap in some areas of Pueblo. This allows a new investor to learn and make mistakes with smaller numbers. I have three properties down there now and I'm still learning.
If you're getting a cheap house in Pueblo, it is likely to be a bit of a rough area. So I would recommend employing a property manager, which eats into your cash flow.
As far as rehabbing from distance, it is doable. If you can make it down there every other week for two months to check on the work, you should be fine. I can give you a list of contractors I've used.
I also have a great Realtor and Property Manager down there that I use. If you'd like to go down and meet with them and learn a bit about them market, let me know.
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