Moving to Denver, looking for advice

3 Replies

Hello everyone, longtime reading first time writter

My wife and I will be moving to the Denver Metro area in April 21' and are looking to purchase our first home that we intent to turn into a rental property after a few years of becoming more familure with the ins and outs of the business. Right now we are targeting 2 bedroom condo / townhouses that fit our current lifestyle and budget and am hoping that anyone local to the area would be able to share any advice on what to look out for that could help us maintain a positive cash flow and best position for long term appreciation.

Are there any resources that you could share that would help us understand the Denver Market in greater detail?

What do units / apartments usually rent for?

Aside from crunching the numbers, is there any general advice for navigation aronud HOA / fees for properties in the area?

Anything insights would be greatly appreciated!

@Zachary Carnahan . Congrats on making the move this coming spring! There are various areas to choose from to live in the Denver metro area and the prices can vary greatly so it would be best to understand the lifestyle you want to achieve.  Cash flow is of course important as it trying to set yourself up for the best appreciation, but since you'll be living there for some time you don't want to pick a part of town that you wouldn't enjoy living in.  It would be best for a Realtor to sit down with you and explain the different parts of town.  There are also a lot of market resources out there that a Realtor can provide.

The being said, typical 2 bed/2 bath rents are around $1700-$2500.  But when doing research and calculations, use rentometer for the most accurate rental figures.

HOA tips: make sure you actually read the HOA docs and the meeting minutes. Be on the lookout for any previous or upcoming special assessments. You'll want to make sure there are good reserves. Also take note of the HOA fee history. If it's risen a lot every year for the past few years, you'll want to find out what's going on. Also, if there is a capital reserve study, take good note of what was outlined. That will tell you the remaining life-span n major community components and what it would cost to replace. Remember, you can terminate a contract if you don't like what you see and you can get your earnest back!

Hi @Zachary Carnahan , Denver living is just awesome! Congrats on your upcoming move! The points made above by @Maria Bakaj regarding HOAs are really key! Rentals in HOAs can be tricky, and the HOA may derail your intentions to rent altogether. Be sure that the HOA allows renters (check rent restriction in bylaws) and how involved the HOA be in your rental decisions - many HOAs require that rental applicants apply directly with them and may have high application fees or standards that may not be easily met by renters. You also want to know what percentage of owner-occupants vs renters the HOA requires, as that ratio may end up placing you in a 'waiting list' until your unit becomes eligible for rental (this could be years in some cases).

HOA reserves are really important too; condos often (not always) require minimum 10% down payment for financing (which is higher than your standard 5% down for owner-occupant Conventional loan). I learned about the importance of HOA reserves the hard way; if an HOA is low on reserves, you may end up having to dish out a much higher down payment. In my case for a condo I purchased in South Florida, I ended up having to put down 30% for down payment due to HOA not having reserves, and oh by the way I learned of this just about one week prior to going to the closing table. Fortunately, it was still a good deal and I had the money to do it at the time!

Finally, assessments... HOAs are like mini government entities and most of us don't think of government as well-managed organizations; by that logic, many HOAs also lack good management and can result in assessment after assessment. Think of these assessments as new taxes, and they can be as low as a few hundred dollars or several thousand dollars. On the bright side, existing assessments may provide a point of negotiation with the seller (though not as powerful in a hot sellers market like we seem to be in).   

In general I'd encourage you to consider not purchasing in an HOA if your intention is 100% to make this property a rental. Having said that, there are advantages to such properties - perhaps the HOA has a pool, gym or other amenities that you could not obtain otherwise. In my case, the South Florida condo I purchased is waterfront with marina views! Condos can also make for 'easier to manage' properties as you're really only responsible for maintaining the interior (referred to as 'contents' in condo world) and windows. Rarely will you as an owner be responsible for replacing the roof, renovating siding or repairing sewer lines (though this is where those assessments may come into play). 

Best of luck on your journey and we look forward to hearing more on your decision! 

@Zachary Carnahan

A premature welcome to Denver! As I tell everyone I meet, it's 300 days of sun, proximity to the mountains, great beer, legal weed, a super awesome bar and restaurant scene, arts and culture. What's bringing you here?

It's impossible to say what condos rent for without knowing the condition, the building and the location. But I'm not opposed to condos. My and Erin's first three properties were condos. we still have two of them, and they're doing well as rentals. Plus, right now they seem to have lower demand as people dealing with covid want some space and a house with an office. That means there are some condos out there that aren't flying off the market as quickly as SFHs. 

All the others' thoughts about reserves and budgets are spot on. I'd add to check the HOA declarations for their rental rules. Our two condo rentals in Denver are furnished medium-term rentals. We rent them for 90+ days. But when we're reading HOA rules & regs, we run across buildings all the time that have a 6-month minimum rental requirement. Maybe you'd only do long-term rentals, but just check.

I wish you luck!