Investor · Carmel, IN · Member since 2014 · 332 posts · 245 votes
Denver’s apartment market got off to a strong start this year, as tenants absorbed all the units that hit the market and then some, pushing up rents and driving down vacancies. Developers delivered a robust 3,959 new units in the first quarter and tenants absorbed an “impressive” 5,552 net units, according to the Denver Metro Apartment Vacancy and Rent from the University of Denver and the Apartment Association of Metro Denver.
Read that as well. It's stories like this that give me confidence in the long-term viability of Denver's real estate market. There are just so many people that want to live here. There is a diversity of industry, and we continue to see a lot of coastal clients coming in that believe Denver is a relatively cheap place with amazing quality of life.
So while cash-flow-wise, Denver's not a great investment, (discounting creative house-hack and Airbnb/short-term rental strategies), it certainly looks like a great place to own long-term.
This jives with my recent experience listing an upcoming vacancy (2/1 in a Wash Park West triplex). This unit was rented for $1,800 in 2017, $2,000 in 2018, and I decided to try another 10% bump to $2,200 for the new listing just as a test seeing as current tenants are there until June so I had time to lower it if needed. Surprisingly strong response with 12 inquiries within a few hours and 3 qualified applicants to choose from after an open house that had 8 groups turn out. It's filled less than a week later at $2,200. Less inquiries from out-of-staters moving in than previous years however; in the past I've been flooded with literally dozens of applicants from the coasts and that seems to have slowed down a bit.
With rent increases like this, it almost justifies buying with neutral cash flow in anticipation of raising rents. For example if one had bought 3 years ago with neutral cash flow they'd almost definitely be cash flowing at least a few hundred per month now (if they took every opportunity to raise rent that is). Not to mention average appreciation for Denver property during that time equates to a few hundred PER DAY, so I'd say it's a great market.
Not seeing as strong of a demand at our Lakewood apartments or up in Boulder County however: vacancies have been slightly harder to fill up here and in the burbs than past few years and I've even had to list one unit with a rent increase of less than 10%, cry me a river... ;)
We may be reaching the ceiling however as rents have been increasing more than wages recently. About half our applicants don't have income that meets the 2-3x rent threshold, even with positions in architecture, software engineering, etc. which is an indicator that we're approaching the upper limit of what people can afford.
I guess we'll find out where the ceiling is naturally, as senate bill 225 (rent control) is stalled for the time being: