First of all welcome to BP, I see this is your first post. Lots of great people on here willing to help. There are a few good property management companies I know if in Denver, I'm happy to share (sending you connection request).
Regarding which neighborhoods to recommend, that depends on your goals. If you're looking for high cap rate, you'll have to look on the outskirts of town. But since you mentioned Cap Hill, perhaps a high cap rate is not what you're looking for? MF properties in Cap Hill are generally low caps. If you're looking for appreciation and you have a lot of starting capital, Cap Hill is a safe bet, but you'll tie up a lot of cash for low cash flow. If you're looking for a healthier blend of cash flow and appreciation, I'd look elsewhere in the city such as the areas on the perimeter of the already hot areas.
First of all welcome to BP, I see this is your first post. Lots of great people on here willing to help. There are a few good property management companies I know if in Denver, I'm happy to share (sending you connection request).
Regarding which neighborhoods to recommend, that depends on your goals. If you're looking for high cap rate, you'll have to look on the outskirts of town. But since you mentioned Cap Hill, perhaps a high cap rate is not what you're looking for? MF properties in Cap Hill are generally low caps. If you're looking for appreciation and you have a lot of starting capital, Cap Hill is a safe bet, but you'll tie up a lot of cash for low cash flow. If you're looking for a healthier blend of cash flow and appreciation, I'd look elsewhere in the city such as the areas on the perimeter of the already hot areas.
@Ken Hart Welcome to BP! I'd echo @Steve K.'s comments. Even in the SFR rental segment, cashflow is poorest in core Denver, and improves as you move into the suburbs. Finding a distressed or value add 4-12 unit will take a very keen agent as many go before they even make it on the market, but it can be done. Many MF investors are being pushed outside the 470 Loop, but that's not necessarily a bad thing as many of those areas are growing quickly. Just shot you a connection request, I'd be happy to talk rental segments and geography.
We have two investments in Capitol Hill, but they are not multi-family, which will be challenging to find in that area.
Depending on what you want to do in Denver, it may or may not be the right fit. Property prices are expensive here, and while rents are increasing- they have not increased to the point where you have great cash flow. If that's your most important metric, the midwest is a better place for that. If you are open to mortgage reduction or appreciation, than Denver, Colorado Springs, etc. is a better play for that.
We actually do cash flow on both of our Capitol Hill properties, but we purchased them 2-3 years ago, and we also keep them furnished. These are medium term rentals (because short-term rentals are restricted to your primary residence in Denver), and have been pleased with the money and our tenant pool.
Depending on how much money you have, whether you've invested before and what your ultimate goal is, Denver may or may not make sense.
Hey all, thanks very much for the replies. I'll connect with you individually as well for follow up discussions. But to add a little more color here, because I'll be investing out of state, and with it being my first investment, I am willing to give up some cash flow for a "safer" neighborhood/deal - I'm attempting to simply "get on base" as opposed to "hit a home run" in my first at bat.
I have identified Denver as a market I'm interested in based on long-term macro economic factors, so while I recognize that it's already pretty expensive, my time-horizon is 20-30 years, which should still yield good investments. So with that in mind, one of my next steps is to try to identify pockets of Denver that have a pretty good chance to not be left behind over that time horizon.
@Ken Hart - Denver is a great market to invest in. I personally would recommend staying away from Cap Hill just because the purchase prices are so high. It is a part of Denver that has already "blown up" so the appreciation there likely won't be at an exponential rate as it would in some other areas.
If you want to stay within the confines of Denver that are poised to grow significantly in the next few years, I would recommend Villa Park, Barnum, Athamar Park, and Edgewater. There you can find small multi-family properties at a semi-reasonable price.
If you are okay with going to the suburbs of Denver, I would recommend Arvada, Westminster, and Thornton as areas that will still cash flow and are poised for great appreciation. Denver seems to be moving North with the building of the World Trade Center in RiNo, the "Big Dig" putting I-70 underground, etc.
Personally, I am primarily investing in the North because the cash flow is so good and it feels that we are right in the path of progress.
Hey Ken, all the advice in this thread is good, but it may be wise to invest locally if you're a first-timer. I don't want to COMPLETELY scare you off, but trying to buy and manage a first-ever investment property in one of the most competitive markets in the country from 1500 miles away isn't what I would consider an ideal situation if you're just starting out. You WILL have considerable headaches, even if things go relatively smoothly...the inexperience and distance make this an absolute certainty.
That being said, if you've got your heart set on it, DM me and let's talk a little more about specific areas if you'd like.
@Ken Hart My partner and I own and operate multifamily buildings in metro Denver from out-of-state. We are able to do this by having a reliable local team in place which includes a property manager, RE broker, mortgage broker and contractors. Once we developed the foothold in the market, we were able to build strong local relationships, which improves deal flow. This takes time, patience and time spent on-the-ground and in-person to meet people face-to-face, walk/drive the markets and test your assumptions of certain fundamentals.
Unfortunately, we are late in the cycle and the multifamily property types you're pursuing (not just in Denver but in other desirable markets and undesirable ones too) have lots of competition for buyers, often unsavvy ones who are not carefully underwriting their deals and as a result driving up the price per door or family offices/UHNWIs with patient money that can afford to buy at lower short term yields than you or your investors may be willing to tolerate.
As investors, we all must proceed cautiously at such elevated pricing:
Investment performance relies on strong rent growth and continued low cap rates at refinance or sale.
Demand has pushed prices for riskier properties with less upside to unsustainably high levels.
Many secondary and tertiary markets with recent rapid growth have questionable fundamentals and are becoming overheated
Welcome to BP. I live in Kansas City and own properties in the Multifamily space. If you're looking to connect and network in the KC market, let me know. Its seeing growth very similar to what Denver was doing 5-6 years ago. Cheers!
@Ken Hart - I would recommend considering Colorado Springs. We aren't quite as big of a metropolis as Denver but we are still a big city hitting top charts year after year and you'll likely find a better ROI being a lower price point. Just something to consider for the small multi-families / apartments.
@Ken Hart, here are some interesting, recent articles about Colorado Springs' growth, appeal to millennials and rising tech scene. All of these factors make it an attractive long-term play.