Denver Metro Investing

9 Replies

Hi All,

This is my first official post.  I've been researching & learning amazing things on BP. <3 The podcast. Thank you so much to everyone that gives back the wisdom that you've been imparted with. I would love to give back by offering insight in to the automotive service industry.  I was a Volkswagen/Audi technician for ten years. I would be pleased to answer your VW or Audi questions in a PM.   

I am looking to invest locally in the Denver metro area, specifically for a rental property with good cash flow in the low 100k's. The market is so hot as you probably know that all deals are being sold @ or over listing price. I have put in two offers on two different condos in the last two weeks, lost both deals.  I even offered 5k over asking price on one of them. 

I would love some expert advice on how to secure my first deal in this hot market.  I also may be in the market for a local real estate agent who's familiar with rentals & the Denver market.

Thx!

Hello@Jared Chipkin ,

I see you are already feeling the purchasing pain in Denver.  The key is patience.  Deals are out there, but they are very difficult to find.  Your price point is VERY hot right now.  In fact, KUNC had a story this morning on the housing market up in Northern Colorado.  Can you believe that in Ft Collins, Greeley, Loveland and Windsor, you apparently cannot touch a house (according to the story ) for less than $250?  

That said, if you can get something purchased, you'll definitely be able to get it rented.  Be careful not to join the bidding frenzy that can/will result when the listing agent contacts you for your Highest and Best.  I usually write my offer that way the first time, so I just tell them they already have it.

Also, be prepared - at your price point, you'll have quite a bit of rehab.  I'm working a deal now that has the purchase point below $150, but will require about $50 of rehab as well.  

My last deal took me about 6 months to find.  While I hated not having my money working, it was better than throwing it away on a bad purchase price.  At some point, we're due for a correction.  This rocket can't continue, can it?

I've put offers in $21k & $27k over in the past few weeks and didn't get the property for my client. That is in the $500k range. 

We are hitting the summer season where buyers will be out in FULL force, so competition is going to get worse with no relief on the horizon for more supply. 

I would check for FSBOs on craigslist and wherever you can find them. However the ones I have seen have been overpriced.

What are you thoughts on Colorado Springs? I'm working with 1 investor & one retail buyer down there in that price range. 

@Jared Chipkin

There are some local agents on here that could probably give you some advice or at least could possibly point you to someone who has the time.  I work for @Micki M. and she may be able to give you some insight.  Hard part about buying the properties right now is that cash always wins.  I've met multiple people who were trying to buy their primary residences and got beaten out multiple times due to full cash offers.  Did you ever consider going the house hacking route?  It could open up some new options for you.

Dan Mackin, Real Estate Agent in CO (#FA.100056958)
720-971-7139

@Jared Chipkin

A couple of things in response to this.  First of all, I recommend extreme caution when considering investing in condos.  Condo construction has been stifled due to some laws and aggressive law firms that are (in my personal opinion) very trigger happy suing builders for defects.  This has resulted in a long term shortage of condos in Denver, relative to similar markets around the country.  These laws are likely to be relaxed soon, and I'd expect a flood of newer, better condos to come on the market over the next 5-10 years.  Because I expect this to occur, I do not even consider investing in condos, as I don't want my purchase to be competing with newer, bigger, and better condos for market share in the next few years.

As far as purchasing properties in the low $100s, I recently purchased a duplex in the Clayton Neighborhood a few months ago.  I outlined how I did that here - I hope that provides some value to you as you define your search parameters and strategy.

The key for me was that as an owner occupier, I was looking at multifamilies that other homeowners weren't interested in, and I bought a property under HomePath's first look program where Fannie Mae only allowed people who intended to LIVE in the property to offer on it for the first 30 days.  This combination shielded me from competition from both homeowners and investors, and I think allowed me to get a great deal.

Id rather be selling then buying in Denver right now and i am. I have not found any deals on the MLS for rental in quite some time. The numbers simply don't make sense. I just saw a wholesale property in the Barnum neighborhood 2/1 800 sq ft that needed quite a bit of work. They were asking 160k. On a great day, that property will rent for 1100. I sold a similar property over there a few months back. 15k over asking in 3 hours. Inside was okay but rental quality, no garage, terrible yard. I'd rather not compete with those buyers.

My recommendation to investors in Denver is wait for the Price to rent ration to improve before investing in this market. Most rental purchases will be speculative. I doubt the MLS will give you many solid buys. off-market deals may still find some properties that cashflow.

Originally posted by @Linda Weygant :

Hello@Jared Chipkin ,

I see you are already feeling the purchasing pain in Denver.  The key is patience.  Deals are out there, but they are very difficult to find.  Your price point is VERY hot right now.  In fact, KUNC had a story this morning on the housing market up in Northern Colorado.  Can you believe that in Ft Collins, Greeley, Loveland and Windsor, you apparently cannot touch a house (according to the story ) for less than $250?  

That said, if you can get something purchased, you'll definitely be able to get it rented.  Be careful not to join the bidding frenzy that can/will result when the listing agent contacts you for your Highest and Best.  I usually write my offer that way the first time, so I just tell them they already have it.

Also, be prepared - at your price point, you'll have quite a bit of rehab.  I'm working a deal now that has the purchase point below $150, but will require about $50 of rehab as well.  

My last deal took me about 6 months to find.  While I hated not having my money working, it was better than throwing it away on a bad purchase price.  At some point, we're due for a correction.  This rocket can't continue, can it?

 I have a rental under under contract for 126k in Greeley. 

Originally posted by @Jason Miller :

Id rather be selling then buying in Denver right now and i am. I have not found any deals on the MLS for rental in quite some time. The numbers simply don't make sense. I just saw a wholesale property in the Barnum neighborhood 2/1 800 sq ft that needed quite a bit of work. They were asking 160k. On a great day, that property will rent for 1100. I sold a similar property over there a few months back. 15k over asking in 3 hours. Inside was okay but rental quality, no garage, terrible yard. I'd rather not compete with those buyers.

My recommendation to investors in Denver is wait for the Price to rent ration to improve before investing in this market. Most rental purchases will be speculative. I doubt the MLS will give you many solid buys. off-market deals may still find some properties that cashflow.

Personally, I think you'll be waiting for 30 years for the price to rent ratio to improve.  I don't see people leaving Denver, but I see a lot of new faces every month.  

I won't cash flow negative on a property I buy, but I'm certainly willing to a sacrifice a few points on my cash on cash return relative to what I'd get in Memphis, TN, or Milwaukee, WI on a rental for a chance at appreciation by buying in great neighborhoods here in Denver, CO.  Especially if I buy it initially as a house - hack, and rinse and repeat once I'm confident in the cash flow.  We are in a growing city.  Perhaps I'm young and naive, but I see that as a GOOD thing -  not a bad one for the savvy investor.

@Scott Trench I understand the sentiment and more power to you if you can make it work.  My first house here in N Aurora was purchased to eventually become a rental.  It is one of my best cashflow properties.  

 There is nothing wrong about jumping in the path of appreciation, but I think anyone purchasing now might be catching the top of the wave.  Income has not kept up with raising prices, we still have plenty of room for expansion, and gas/coal are still a large part of the Colorado economy.  There are other large factors that have kept me cautious as well.  Could we see another few years of appreciation?  sure, but I think we are due for a correction.  

Lets look at one of my target zip codes in N Aurora.  90% of households make less than 75k per year (3800/mo after taxes) with 45% making less than 30k per year (2200/mo after taxes) .  The cheapest 2/1 you will find is 130k.  Rents are routinely 950-1050 on these sized homes.  Even 2/1 apartments are renting for $900/mo now.  Nearly 50% of the people in this zip code would have slightly less than 50% of their take home pay going towards rent on the lower end properties.   While many of those will be subsidized, that will not keep up with rent increases.  

Great insight everyone.   @Linda Weygant the 100k price point is extremely competitive I've come to find out. The last bid I put in lost to a cash offer. It was at a fair price but the HOA was too high, so I wasn't crushed by the loss. I think the market will be going strong for at least the next couple of years or until all these new condos are built. Denver seems to just grow & grow. Especially now with MJ tourism. The more people that visit, the more people that are going to want to move here.

@Scott Trench I will definitely check out your duplex purchase thread. I have considered house hacking, but I am with wife and currently live in a SFR that we both love, she especially. I would be ok with pulling $150-$200mo. cash flow after all expenses are paid and reserves are banked. I would do my own property management. My target area is mainly Littleton & Centennial. There are still properties that would do this, though rare and I can't be overbidding on them.

@Dan Mackin @Micki McNie  It does seem like everyone in the real estate biz is super busy right now.  I know that's a good thing and at my price point they don't have too much incentive.

@Jason Miller I don't know that price to rental ratio is going to improve.  I wish I would have gotten in a few years ago, but didn't have the funds or knowledge back then.  So what better time than now!   I have found a couple deals better than the one that you mentioned.  They are definitely hard to come by though.

@Matt M. Scouring craigslist is one of my favorite past times.   I have been doing it for years looking for used Audi's and Volkswagens to flip.   Now I am totally addicted to looking for properties on  CL also.   My wife hates it, totally spend hours on there (or on BP) without knowing.   As for location, Denver -> Littleton/Centennial is my range, trying to keep it as close as possible since ill be managing the property. 

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