Bad time to buy rental in Denver?
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Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
9yBought a 2 bd condo with an HOA of $157 per month that includes the heat. Paid $80K using 100% private money financing at 8% interest only for one year (payment $533.33). Put $5,000 into it in repairs (carpet, paint and appliances). Rents for $256 per week on a year lease. This was an off market purchase. I bought three properties in 2016 that I am currently holding. Those that say it can't be done will end 2017 without any properties. Those that figure out a way will be on the path to prosperity.
17 Replies
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes9y
Disclosure: Im not in Denver nor do I invest there.
I do have a lot of experience investing in hot markets, and I am a proponent of it. Hot markets are how we get rich. I know Denver has been insanely hot...but prices are still pretty moderately priced compared to other metro areas. You have rising prices because of the amount of people who are moving into Denver. So there is high demand.
The one thing I do wonder though is if the incoming Attorney General begins to enforce federal law regarding marijuana, what effect that might have on the Denver market. @Scott Trench and @Mindy Jensen....do either of you two have any insight as to what amount legalized marijuana has played in the population boom in Denver?
District Invest Group545 Reviews - Lender · Denver, CO · Member since 2009 · 1k+ posts · 597 votes9y
@Jason H. there might be 100 other threads about your exact question. Prices are up, but so are rents. So long as you are purchasing on sound principles, keep strong reserves and are buying for the long term you will do well. There are other markets that may perform better with lower barrier of entry but you have to do what you are comfortable with.
One of the best parts of rental real estate is you don't have to buy at deep discounts like flippers, 10-15% below market value works well and is very doable.
- Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes9y
Deals can be had in any market. I'm buying one or two as soon as my flip closes next week and my credit score goes back up after paying off everything related to the flip.
I just put an investor under contract on a condo $30k below market(off market deal), and she's looking for more. Don't try and time the market; if the numbers make sense, pull the trigger.
- Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes9y
Originally posted by @Jason H.:
I currently own one rental property in Denver and have been working to purchase the next one in a month or two. It is obvious that the housing prices are through the roof! Anything and everything I have ever learned about investing is buy low, sell high. It does not seem to be like a good time to purchase a rental property unless it is a low price junker that needs work. What are your opinions?
We all have opinions. I think it's a fool that tries to time the market. It's also foolish to ignore the facts. My advise is to get educated on the market. By that I mean learn the forces driving our market and what is happening in the market. One place to do that is the Pine Financial Summit put on by @Travis Sperr and company (I have no affiliation with the group). It happens in the spring and fall. He posts it here. At the last one, there were a couple of presentations that touched on this topic and indicated we probably have 4-5 years of reasonably strong growth ahead in the single family world barring some national or worldwide economic crisis. Don't take my nor anyone else's word for it. Dig in and learn.
I completely agree with @Russell Brazil, significant wealth is made in rapidly appreciating markets. If you know what's going on you are in a position to take advantage of it.
Most posts responding to these types of questions are opinion. Granted some of the opinions are based on data but some are based on anecdotal info which can be helpful to fill in the holes. Real data is how you have an edge above the rest. Most folks follow the herd, everyone is buying so now must be a good time. The movie "The Big Short" is worth seeing if you haven't already done so. Some are contrarian, everyone is buying so now is a good time to sell. Figure out what the data says and follow that.
- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9yJason Hawkins Trying to time this market (or any market) is tricky to impossible. If you have a cash-flow positive deal in front of you and you pass you miss on the cash-flow you could have had while waiting for the market to drop. Additionally, you have a Fed that may raise interest rates 3 times in 2017. If a property drops 10% in value (and rents stay steady) but you go from paying 4.5% to 5.25% for an interest rate it could be wash (or worse). But, hey, I'm no economist. One thing that I always think about is if I'm competing with homebuyers for a deal or investors for a deal. Homebuyers (right or wrong) can and will pay more for a home as they get an emotional attachment to it. If you're competing with investors you're competing with others looking for a cap rate (less emotion). You're also only bidding against other people who want a "deal" (read: purchase price with the potential for return) so the market adjusts the pricing accordingly.
- Flipper/Rehabber · York, UK · Member since 2013 · 895 posts · 453 votes9y
@Jason H. as everyone has said, timing the market is a guessing game. My approach is to get clear on my specific needs and timeline. What kind of cashflow do you need to make to be happy with a purchase? Are you prepared to hold that property for the long term? What happens in your worst case scenario (lose your job, suddenly need to move away?). If you can answer those and find a property you like that meets your criteria, then you can buy. The other question to ask is, if you don't buy in Denver now what is your alternative? How will you keep your money working for you? Let us know what you decide to do.
- Investor · Denver, CO · Member since 2014 · 5 posts · 5 votes9y
@Jason H., I agree with you. I haven't seen much (as far as single family buy and hold) that I would be comfortable buying in the Denver area.
Has anybody bought anything in the past six months that they would be willing to share the numbers on? The reason I ask, is that I have seen people buying rentals with numbers that wouldn't let me sleep at night, hoping that current appreciation rates and rental increases will keep up.
@Russell Brazil I may be the minority here, but I don't believe that legalized MJ has had as much of an impact on the Denver market as many people think. The population growth of this area has been exploding for much longer than legalized pot has been around. From population data I have looked at, there isn't a significant jump after legalization. What you do see, however, is that the population continued to expand, even as construction came to a near halt during the financial crisis. The timing was mostly just coincidental that pot became legalized at the same time that housing fell completely behind.
- Lender · Denver, CO · Member since 2009 · 1k+ posts · 597 votes9y
Originally posted by @Kevin O'Brien:
@Jason H., I agree with you. I haven't seen much (as far as single family buy and hold) that I would be comfortable buying in the Denver area.
Has anybody bought anything in the past six months that they would be willing to share the numbers on? The reason I ask, is that I have seen people buying rentals with numbers that wouldn't let me sleep at night, hoping that current appreciation rates and rental increases will keep up.
@Russell Brazil I may be the minority here, but I don't believe that legalized MJ has had as much of an impact on the Denver market as many people think. The population growth of this area has been exploding for much longer than legalized pot has been around. From population data I have looked at, there isn't a significant jump after legalization. What you do see, however, is that the population continued to expand, even as construction came to a near halt during the financial crisis. The timing was mostly just coincidental that pot became legalized at the same time that housing fell completely behind.
My last two purchases where in February 16 ( little more than 6 Months) - Bought 2 town homes in Denver.
Both right off the MLS
Property 1 - $162k plus 12k in repairs - rents for $1,850 (increase coming in March should get to $2,000 with included utilities section 8, HOA $180 per month (water, sewer, trash, exterior maintenance, snow removal and landscaping)
Property - $188k plus 2k in repairs - rents for $1,900 HOA $180 per month (water, sewer, trash, exterior maintenance, snow removal and landscaping).
I put about $60k down on each as a part of a 1031 exchange - payments are PITI $1023 and $1138 respectively on 15 yr notes at 4.5%
- Investor · Denver, CO · Member since 2014 · 5 posts · 5 votes9y
Thanks @Travis Sperr.
- Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes9y
Bought a 2 bd condo with an HOA of $157 per month that includes the heat. Paid $80K using 100% private money financing at 8% interest only for one year (payment $533.33). Put $5,000 into it in repairs (carpet, paint and appliances). Rents for $256 per week on a year lease. This was an off market purchase. I bought three properties in 2016 that I am currently holding. Those that say it can't be done will end 2017 without any properties. Those that figure out a way will be on the path to prosperity.
- Real Estate Investor · Denver, CO · Member since 2017 · 2 posts · 1 vote9y
Jason,
I moved to Denver 5 years ago from another hot market DC/ Maryland... after the bust. I saw the housing market take off there and I did well. I had the same question here in Denver. I am now ready to purchase and the prices are jumping each week. I have seen over the last few years, a strong positive trend of people moving in which has increased demand.. I agree it is imperative to have your education and financials in order. Its a long term strategy and I do believe in rent and hold (for me).
Thank you all for the confidence booster!
- Real Estate Agent · Denver, CO · Member since 2014 · 151 posts · 101 votes9y
In the latest housing crash, housing prices plummeted, but the median rent did not. The factors driving housing prices and rents are similar, but not the same - meaning that if you find a cash flowing property that meets your personal criteria I wouldn't worry so much about the price of houses. If your rental is cash flowing and you have your financing locked in (not an adjustable rate mortgage) but the market in Denver crashes, don't sell it. Just wait for the market to come back up and continue to collect your cash flow.
(see first chart here: https://www.apartmentlist.com/rentonomics/rent-gro...)
- Aurora, CO · Member since 2016 · 30 posts · 7 votes9y
@Bill S., you do weekly rentals? How does that work?
- Denver, CO · Member since 2016 · 51 posts · 29 votes9yHey Jason, I'm going to tell you what no one here has said yet. It doesn't matter if the market is up or if it is down. If it's a hot market or a cold market. If it's a strong cash flow market or a great rehab on appreciation market. No matter what is going on you'll never make it in this business if you don't start with the absolute basics of education, sales and marketing. Particularly sales and marketing. Why these two? Because if you don't know how to find and covert human beings who NEED to sell a house, then you'll spend a lot of time worrying about the market. There's a strategy for every market. EVERY MARKET. That's why thousands of people earn money everyday in real estate worldwide. You need to learn marketing so you consistently find deals with out having to depend on anybody or feel like "there's no deals" in Denver. Most of the time when I hear people struggling in this business is because they can't find deals. It's not that they really care about if it's a hot or cold market. Think about that for a second. If you had quality leads coming to you at a rate of 3 new sellers a day, would anything else matter? Sure but not as much as the Leads do. It's like the movie Glenngarry Glen Ross when Alec Baldwin says, "these are the new Glenngarry leads.." while they are in pink paper wrapped in a freaking gold bow. Everyone in that office was stressed because they had no leads. Trust me on this one. It's the "darkest secret" no one talks about in real estate because the ones that do understand this don't share it. Sales is the second most important thing because once you have leads, no matter the source, you must know how to convert them so they decide to sell to you at a discount or terms. I can go more into this as well but I really wanted to hit it home with the marketing part.
- Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes9y
@John Wanberg I have an annual lease and collect rent every week (instead of once a month) using a debiting service that takes the money from the tenant's bank account. This happens once a week and I set it up to occur when they get paid. The weekly rent amount is the monthly rent divided by 4. If you do the math you end up collecting 4 "extra" weekly payments throughout the year. This is clearly disclosed up front with the tenants. I did this because they didn't have great credit and it seemed like the best way to stay on top of things with them.
- Turnkey Investment Provider · Kansas City, MO · Member since 2015 · 1k+ posts · 116 votes9y
I think it depends on your expectations. What are you wanting to get out of your investment? Cash flow? Equity? Both?
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