Is 1% rule still possible in Denver? I can't even find cashflow!

28 Replies

I live in California and thus would like to be an out of state investor in Denver. I'd like invest in Denver but with HOA and property management fees, I am always negative around $150/mo in cash flow. Where and how can I find cash flowing properties in or around Denver? My budget is $270k for ideally 3b2b. Thanks.

@Diane Tycangco

If you are investing out of state anyway, why are you trying to jump into yet another overpriced market?

Have you looked at Memphis, Kansas City, Oklahoma City, and the rest of the long list of where investors are getting insane cashflows right now? 

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What I mean is cashflowing with 20% down.  what you are saying is that all properties cash flow -  if they don't at 20% then increase your downpayment, right?

Originally posted by @Diane Tycangco:

What I mean is cashflowing with 20% down.  what you are saying is that all properties cash flow -  if they don't at 20% then increase your downpayment, right?

 Yield is a matter of underlying risk in any asset class, whether real estate, dividends, bonds. If you want greater yield, then you need to take on more risk. Denver is a relatively low risk market this why the yield is relatively low. Either increase your risk, or lower your leverage.

Hi @Diane Tycangco,

Denver is still a great place to invest! The Denver Metro Area has exhibited an average of 6% growth in value every year for the last 40 years! A knowledgeable agent like @Chris Lopez can help find properties that appreciate and cash flow. If information is what you're looking for; Chris can be found within many of his classes and webinars. 

@Diane Tycangco I know agents from Denver that are also investors that are still coming to OKC to invest. Even though they've got the best tap on the market, first access to on-market inventory it's just tough to do there right now due to the high entry point and exactly the pain point you're facing.. the inability to cash flow with only 20% down. 

As far as appreciation, OKC appreciates slowly, but steadily. We see around 3% annually, which is just enough to cover increases in insurance and taxes. You won't ever have big exciting jumps, but during the next downturn, you won't see a big drop either! 

Overall an off-market deal here looks like 60-150k, 7-8% cap rates and cash flow from $100-$200 a door after all debt service, vacancy, maintenance, property management and other operating expenses! 

I tried to contact Chris Lopez but no reply.  Being from California, what I am trying to do is the exact opposite of what his podcast Podcast #92: Out of State Investing w/ Terrance Doyle is saying meaning invest where you live.

I would look at markets close to Denver as mentioned above! I have seen some condos that can cashflow in Denver, but thise come with their own worries. Mainly poor quality neirborhoods, or newly formed condos from a previous apartment complex. Again, I would look at Colorado Springs, Fort Collins, or some areas in Pueblo.

Originally posted by @Diane Tycangco:

I live in California and thus would like to be an out of state investor in Denver. I'd like invest in Denver but with HOA and property management fees, I am always negative around $150/mo in cash flow. Where and how can I find cash flowing properties in or around Denver? My budget is $270k for ideally 3b2b. Thanks.

 There are still cash flowing properties in Denver but you have to go multifamily, 3-4 units minimum. With a budget of $270k you could put 25% down on a quad and get cashflow. 

Rents here have been going up so fast, properties I bought just a few years ago with $250/door cashflow are now kicking off $400/door. Even better than that, they have appreciated $350 PER DAY. 

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Looking for a 3br 2ba home with a value of $270k is simply not going to happen in Denver. The median sale price for a 3 bed house in Denver is $465k. However, you could find a 1br house in your budget. Your best bet for what you are looking for would be to look in Colorado Springs, or Pueblo.

@Diane Tycangco ... Denver is very tough market to find good real estate deals in. I am north of Denver in Ft. Collins and this area also is becoming almost impossible to find 1% deals. In addition, it is hard to find reasonable properties for under $270K -- unless you want to go the "slum lord" route. You could look into areas such as Loveland, Windsor, and Greely, but they are clearly not the same as Denver. That said, I must agree with some others as you can also look at other markets outside of CO to find solid 1%+ deals.

Colorado is becoming less investor/landlord friendly, with Denver leading the way. I have several small multi-family  properties in Colorado Springs, and it is becoming difficult to find a 1% deal. 

@Diane Tycangco we connected over email, correct?

Yes, you can still find cash flowing properties in Denver. However, the majority of condos are investor heavy and therefore require a 25% down payment for a 30 year conventional. Some local banks, will lend on those conds at 20% with their portfolio products, but then you have 5/1 or 7/1 ARM.

Is Denver the cash flow? No. The bull market has been going on for a long time. Most markets will have compressed cap rates. Investing out of state at a 7-8 cap rate to me is not worth the risk of being a long distance landlord. I'll take a 6.5 multi cap or a 7.5 condo cap in Denver, before looking out of state.  I live in Denver, since you're out of state, it may make sense to invest elsewhere. Regardless, I think more people should invest where they live for a long term investment. Yes, there are places to even invest in California!

@Diane Tycangco

A couple options I'm thinking of. 

1. What about a really small condo in the heart of Denver that you can furnish and rent to traveling nurses? That usually brings in 20-30% more per month than a traditional long-term rental. (There are places around $170-$180 that can be nice. I am trying to get some clients to buy a $150k place right now that I think would do well.)

2. Maybe a slightly larger condo out west by the CU medical campus. You can get a 2 (maybe 3) bedroom unit out there that might cash flow okay as well. 

3. Look at Colorado Springs, where your $270,000 is going to go further. Also, you have the option of operating an Airbnb/short-term rental, which can give you flexibility and likely higher rents.

Thank you James.  My budget is actually $70k.  The total value of the property would be $270k.  How much would a condo for traveling nurses rent for and what would be the vacancy rate for those?  Do you have  prospects for #2 and/or #3?

@Diane Tycangco 

I have invested in Denver for the last 8 years. Now I am not finding the cashflow I want. The first property I bough was at 1.8% (so close to that illusive 2%) and that was off the MLS. I personally don't like to work super hard when finding a place, to me the competition is just to high in Denver, so I went out of state and get 1.5%-2.0%.