Austin Metro vs Denver Metro

13 Replies

I'm looking to purchase a small multi-family property (2-6 units) in either Denver or Austin metro. Overall cost of living in Austin is cheaper, but the property taxes are much higher than Denver. Both markets seems to be very hot and a lot of people are moving to both locations. I'd like to find a cap rate of 7 or higher in a C+/B neighborhood. I'm in Denver now and cannot believe the amount of construction going on especially in south Denver specifically in the city of Parker. Unemployment in Denver is currently higher than Austin.

Thanks in advance for your input!

Bryen

@Bryen Blankenship I don't know the Austin market intimately, but I'm bullish on Denver. Finding a 7 cap on a small multifamily should be possible here. You will likely have to search a little bit and there's a good chance there will be some deferred maintenance or some other problem you will need to solve at that price, but value ad opportunities are a great way to force appreciation/build instant equity anyway and in my opinion a great strategy for this market.

@Bryen Blankenship you identified two impressively strong markets for investing and growth in the US.  

Would you be self managing if you bought in Denver?

What price range are you considering overall for the acquisition?

@Craig Curelop thanks for the reply. Investing out of state does have it's challenges. I have a couple of properties in Chicago that are doing well now but definitely had a couple of bumps in the road along the way. Finding the right PM company is key for out of state investing success.

@Bryen Blankenship - hate to break the unanimous decision here but I'm a big proponent of the Austin market and will continue to be until it becomes comparable in price to other tier 1.5 cities in the U.S. (San Diego, Denver, Portland, etc.).  The pace at which ATX (and the entire San Antonio to Austin corridor) is expanding is pretty incredible - https://www.forbes.com/sites/joelkotkin/2016/10/13/the-next-great-american-metropolis-is-taking-shape-in-texas/#32666e3f1e2f.  Do think there are some really nice options in North East and South East Austin - that combine affordability and tons of upside (and will be 15 minutes from the new Tesla Gigafactory).

Full disclosure - I don't know a ton about the Denver market - so take all this with a grain of salt when comparing.  Can connect you to some folks down there if you decide its a good choice.  Definitely join this group if you're considering the Austin market --> 

https://www.facebook.com/groups/InvestorUnderground/


@Bryen Blankenship Obviously I’m a big fan of the Austin market and just purchased my latest duplex here in July. Both markets are currently in high demand, but if you are willing to pick up a property at least 30-40 years old, opportunities are still around the metro.

@Bryen Blankenship Competition in Denver metro for multi family is pretty fierce right now. Multiple offers, above asking, cash offers, gone in days. And I don’t think this area has a lot of multi family to begin with compared to other cities. There definitely seem to be more opportunities in the SF arena around here right now from what I’ve seen

@Bryen Blankenship - I'm from the bay as well!  Small world :)

Yup - I bought a new build of east riverside in 2017, and SFR in 2016 in south AUstin and a duplex near the new soccer stadium in 2015. Honestly, they are BY FAR the best investments I have ever made. Think appreciation is less hard to predict than people seem to think. If a population is booming...with no indication that it will slow dow...its gonna appreciate.

@Bryen Blankenship

Denver! Admittedly, I'm biased. Denver's got 300 days of sun, the best hiking and skiing in the country, better beer, legal weed and more pockets of cool spaces. Plus, there is a wide diversity of industry bolstering future growth -- tech, hospitality, dining, oil & gas, finance, tourism.

Last time I was in Austin was admittedly in September, and at the end of the day of touring, I had to peel my sweat soaked jeans from my body. I thought I was going to die.

In terms of multi-units in Denver, they can be tough but not impossible. Patience, a willingness to tackle some deferred maintenance, and a realistic expectation of pricing can help. I'm just assuming you already own a property. If you don't, why not house hack by finding a home with a separate basement entrance potential and on a lot zoned for two units (look for the 'TU' in the middle of the zoning designation). Live in it for a year or two, Airbnb the hell out of the basement, move out and then rent both units. 

Just some thoughts. Good luck!

@Bryen Blankenship

Also, if you want to come in at a slightly lower price point but still be mostly in your backyard, what about Colorado Springs? It's not any less competitive, but it is cheaper. 

@Bryen Blankenship both excellent choices for investment markets. I own/operate rentals in Denver so like many of those offering their input, some bias here! Denver continues to attract new residents, and thus far the rental market has proven to be COVID-proof. Out of my 14 tenants, all kept their employment and continued paying rent; what's more several actually secured promotions in essential industries including construction and marijuana. I'd say both SFR and multi-fam markets in Denver are extremely competitive and I'd encourage you to reach out to capable agents with your criteria as deals are available, just be prepared to move quickly. I've seen purchase prices range widely for 4-unit assets and with today's financing rates, you're getting a whole lotta asset even with top-dollar seller market conditions! Wishing you success!