Would you invest in Denver?

17 Replies

From an outsiders perspective investing in Denver looks attractive- low vacancy rates, good macro economic drivers and solid long term cap growth. Are there any major downsides (or upsides) I’m missing here in the Denver market? Would you invest in it? Dan
Originally posted by @Daniel Green :
From an outsiders perspective investing in Denver looks attractive- low vacancy rates, good macro economic drivers and solid long term cap growth.

Are there any major downsides (or upsides) I’m missing here in the Denver market? Would you invest in it?

Dan

 Why are people from Denver choosing to invest in Phoenix? Because Denver and Aurora have already hit their highs, Phoenix is still climbing

https://smartasset.com/mortgage/best-cities-to-buy...

@Daniel Green  Account Closed

I have lived and done RE in both Phoenix and Denver, and they are both very different. I think Mike's claim that Denver has hit its peak is probably speculation. People have been saying that for years and we are still seeing double-digit appreciation in many neighborhoods. There is a massive shortage of supply and labor to meet the growing demand. I think both markets would make great investments. You can probably find better cash flow in the PHX metro, but Denver certainly has the potential for cap growth.

Originally posted by Account Closed:
Originally posted by @Daniel Green:
From an outsiders perspective investing in Denver looks attractive- low vacancy rates, good macro economic drivers and solid long term cap growth.

Are there any major downsides (or upsides) I’m missing here in the Denver market? Would you invest in it?

Dan

 Why are people from Denver choosing to invest in Phoenix? Because Denver and Aurora have already hit their highs, Phoenix is still climbing

https://smartasset.com/mortgage/best-cities-to-buy...

 What scares me about Phoenix is 0% occupancy-how does that happen. Everyone went back to their home country at the same time. 

What happenS when the hedge fundS decide to sell? 

Originally posted by @Eric Adobo :
Originally posted by @Mike M.:
Originally posted by @Daniel Green:
From an outsiders perspective investing in Denver looks attractive- low vacancy rates, good macro economic drivers and solid long term cap growth.

Are there any major downsides (or upsides) I’m missing here in the Denver market? Would you invest in it?

Dan

 Why are people from Denver choosing to invest in Phoenix? Because Denver and Aurora have already hit their highs, Phoenix is still climbing

https://smartasset.com/mortgage/best-cities-to-buy...

 What scares me about Phoenix is 0% occupancy-how does that happen. Everyone went back to their home country at the same time. 

What happenS when the hedge fundS decide to sell? 

 Inventory shortage is severe enough in Phoenix that we'd welcome some relief by Hedge Fund Selloff.

@Daniel Green

What's your investing focus? Long-term buy and holds? Flipping?

I disagree that Denver has peaked. Is there any data on that? 

I'm buying more property this year in Denver. I'm a buy and hold investor. In a 30+ year perspective, Denver has a great long-term potential. I'm also investing here because I live here.

Lon Welsh who's the President of Your Castle real estate and a brilliant investor emailed out this data tidbit today:

Household (HH) formation is a very important driver for the real estate market. When your teenager lives in your basement, that is 1 HH and your family consumes one housing unit. When your teen gets a great job and moves out, you have “created” a HH and the entire family consume one more unit of housing. In a recession, your teen loses their job, abandons their apartment, and moves back in with you. That “destroys” one HH unit. (and some landlord now has a vacant unit).

In economic expansions, the need for housing (rental + owned) expands FASTER than population growth. In a recession, the economy destroys HH, while population growth usually still continues. An expansion always creates, net, lots of new HH. A recession could either (net) reduce HH, be about break even, or have very slow (positive) growth in HH.

The charts below show that, for the entire US, we’re creating new HH at a fast pace. Given we have positive population growth as a country and unemployment is low, that’s just what you would expect. It’s even better in Colorado, since we have a younger than average population (Millennial heavy) – prime age to have kids. Our local economy is creating jobs faster than the national average, so we import workers from other states (e.g., net positive inbound migration). All of this HH growth is absorbing lots of new rental units (see my article with the AAMD rental stats a few days ago) and, of course, keeping the re-sale market inventory really low.

As they say, demographics is destiny, and these deep trends can give you a lot of insight in understanding what the local RE market will do over the next few years.

@Tanner Crawley Thanks for providing an alternative perspective from your experience. From an outsiders view Denver really does seem to be positioned for some great long term performance from a macro perspective. Is there anything about the market that worries you / any common mistakes you see people make when buying in Denver?
@Chris Lopez This is very helpful, thank you. That piece makes some strong arguments re: demographic strength of Denver. Also quite a fascinating perspective on why recessions impact investors more than you would think. Is there anything in the Denver market that worries you? What do you see as being its biggest downside / risk?

@Daniel Green I'll send you a recording of a webinar that discusses the real estate trends in Denver for the last 40 years. The data in there has helped me create an investing plan and feel 100% confident in Denver (in the long run.)

I wouldn't buy places in downtown Denver. There are a lot of cranes all over the city. Even with all them up, the new units coming online are getting rented out ASAP. As @Tanner Crawley pointed out, there's a supply and labor shortage. From what I've heard, none of those projects are on time. Downtown Denver is a small area compared to the metro.

More are people and employers are moving to Denver. That drives price appreciation, low vacancy, and rent growth. Right now is a great time to be a landlord. The market will change eventually. Who knows when!

I can't control the market, so I don't worry about it. My biggest worry is getting too aggressive and not keeping high cash reserves for issues or when the market turns. I want to make sure I still have the property in my 90's...

If you drive through Denver and surrounding areas today, you will see numerous cranes in the air. They are building luxury high-rise apartment buildings. There is a shortage now, which explains the occupancy rates. Most locals that I have talked to seem to think property is over-priced and wages are not keeping up with the prices of homes. Renting is a cheaper option, so supply and demand are driving up prices. The question is, when all of the construction is done, will there be an over-supply of apartments? Will they have to reduce rents to compete for tenants? The U.S. historically goes into a recession, sometimes briefly, about every 4 years for the past 100. Maybe the best time to buy would be in a recession. Only time will tell. Phoenix has a crime problem, so that isn't an option for me personally.

Originally posted by @Matt Morgan :
Originally posted by @Anthony Dooley:

Phoenix has a crime problem, so that isn't an option for me personally.

Care to expand upon this with some facts?

 Is the show COPS still around? Phoenix n Memphis always on. 

The can do 2 weeks continuous on Memphis. 🤗🤗🤗🤗🤗🤗🤗

@Daniel Green Most areas in and around Denver metro have had substantial price appreciation over the last 8 years. You can still find a duplex/four plex with a decent CAP rate but you're going to be paying for it. Right now, I firmly believe you have to be creative to get a great return. There are a lot of bordering cities to Denver looking to change zoning. This may allow building an ADU and being able to use the main house and ADU as investment properties. Short term rentals are still legal (while with complicated requirements) in Colorado Springs which is supposed to have better growth than Denver in 2020 and you can get a higher return with that type of rental.

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