Denver Market Softening/Retreat

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Denver Market Softening/Retreat

Mike Stephens
Denver, CO · Member since 2016 · 16 posts · 7 votes

Hello,

So one thing to get out of the way from the start: the purpose of this post is NOT to debate whether or not there will be a softening in the Denver market. There are plenty of other posts on whether Denver is in a bubble that have been posted the last year or so. I'm happy to post separately on my thoughts there. 

What I am curious on, is for those of you that are in the same place I am, which is firmly believing that the Denver housing market is overpriced, and is due for a flattening out after next year, and in some areas, like small multi-family is actually heading for a price retreat over in the next few years, what are your next moves? I've had a few offers on a duplex in Jefferson Park that I own, that are just ridiculous. Purchased at those prices, these "investors" would be just barely covering expenses, and definitely in the red if they were properly allocating for cap ex.

So what are you all doing? Selling? Just not buying? Buying out of state?  What are your 1-2 year plans.

Thanks,
Mike

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Bill S.Pro Member
Moderator
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
9y

@Mike Stephens I too own in Jefferson Park but don't agree with your assessment of the market. Here is what I am doing. I am not selling. From what I have seen over the years, real wealth is built through the long term ownership of real estate. Getting in and out of the market is expensive. Taxes and real estate commissions take a bite. If I sell and do a 1031 I am either trading out here in Denver or going somewhere else. I've not sold and here is why. Relatively speaking the trend in real estate is in the same direction. Sure you can get more cashflow in some markets but compared to what cash flow was in 2010 coupled with the prospects of growth in the future I don't see a compelling argument to move unless I shift my investing priorities. The question I ask myself, "Would I rather own my property in Jefferson Park in 40 years or somewhere else?" I can't think a better place to own. Now I'm sure smarter people will do better than me by trading up and making sure their equity is generating proper returns etc. I'm a pretty simple guy and base my investing on my grandfather's advise. Are you making money? Yes, then it's good, don't get greedy. 

Am I buying. Yes and at full market price but with 100% owner financing (low out of pocket expenses). Personally I have stepped away from the BRRRR because I don't have the time to undertake the work of a typical BRRRR that I have bought in the past. I have plenty of cash flow to cover a correction and I think that any possible correction in the SFR market here is at least a year or two away. I limit it to 1-2 yrs because projecting beyond that is guessing in IMO.

People have been calling for bubble or correction in Denver for the past 3 years at least. Sooner or later we will at least get a correction but we don't know when nor how much. Had I stopped doing deals 3 years ago, I would have missed out on 30% appreciation in value and about 15% in rent growth. Not to mention the historically low interest rates. My 1-2 year plan is to continue buying property here. If I found a good deal (my definition) in Jefferson park, I would buy in a heart beat. Shoot I'll buy your place at your price if you do a wrap mortgage and the payment will be covered by current rents. Not trying to make a deal, just trying to make a point.

Happy investing.

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  • James Carlson
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    8y

    @Account Closed just to name a few Denver agents I see here often.) Some are starting podcasts or writing books. Others are simply house-hacking experts or BRRR experts or masters of their particular real estate market and then are sharing that knowledge with everyone. I love seeing this brand of hustle!

    Hmmm ... I don't really know where this post was heading, other than to say get out there and hustle!

    4Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    8y
    Originally posted by @Ed E :

     Lots of part timers and newer agents coming in. Barrier to entry is WAY too low. Most agents do a couple if 1 deal per year. The agents I know that are doing well are spending 6 figures on marketing and feeding a team or have a good sphere that they've established and work it. I do a mix of fix and flips and retails clients from my sphere. It's been working well so far. 

    Our inventory still is a big issue and will continue to be as builders can't come out of the ground for less that $450k for a new home. That is the first time homebuyer price point.  Barring some major event, you can expect more of the same here in town. Low inventory, rising prices, frustrated buyers & investors.

    1Reply
  • Jerry Shen
    Denver, CO · Member since 2016 · 114 posts · 99 votes
    8y
    What’s the definition of active? Their license is current or they are doing X deals a year? If just current license those numbers aren’t indicative of much of anything I know a ton of people with active licenses that don’t buy or sell actively 22000 is like 4% of Denver’s entire population
    0Reply
  • Chris LopezPro Member
    Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
    8y

    @Account Closed's point of 10% of agents doing 90% of deals, I believe it. Before I became an agent, I built a MLM sales force (2,000+) and our system was used by many around the industry. I had a very interesting perspective on the success and failure ratios. In that industry it's easily 5% of people doing 95% of the business. I don't see real estate being that different. For a period of time, I burnt myself out trying to make people successful. This will sound harsh... but I learned not to fight what the stats say!

    I believe the numbers will just get even more skewed with technology. Look at how technology has consolidated so many industries. RE won't be any different. Fewer agents (or their teams) will do more of the deals. I think team models built around an agent will grow.

    James I agree, except that I would add "valuable" before the word "information".... which you do! There's already enough fluff info out there... it's about giving away valuable information.

    @Jerry Shen - I believe an active license is anyone that is paying their dues to DORA. It has nothing to do with the amount of deals they've done.

    @Matt M. 6 figures on marketing? Holy smokes! Do you know where they are spending that money? I hope it's not for their photos on anything that they can print it on!

    Podcast Guest on Show How to Use Equity in Your Home to Reach Financial Freedom Faster
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  • James Carlson
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    8y

    @Chris Lopez

    Yes, an important distinction -- "valuable."

    0Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    8y

     Z/T or the other lead gen sites, direct mail, PPC, CRMs, ISAs, data(phone numbers), dailers, etc. As I'm sure you've found out by now, there are 1000s of people trying to sell us stuff. 

    0Reply
  • Robert Herrera
    Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
    8y
    Jerry Shen I understand crypto is the new dollar, yen, Euro. One thing you have to remember, the dollar, yen, etc are CURRENCY. Crypto Currency is “CURRENCY”. Currency is backed the faith and credit of the people. It is not backed by anything other then everyone saying it’s with something. It’s a trust that it’s worth something. Currency is NOT MONEY. When you can print “write code” out of thin air, it is not real. It exists in your Mind. It sits digitally on a computer or in a wallet, like the dollar and other things. The only real money is Gold/Silver. Crypto is like stocks. It’s like the new HOT stock everyone wants a part in. I know it’s not actually a stock, but that’s how people invest in it. All Currency always goes back to $0. Not 1 Currency over thousands of years has ever lasted, and they revert back to Gold/Silver. Take a look at how all these countries are grabbing for Gold/Silver Right NOW, with the coming debasement of the dollar. It’s been debased so much, people don’t realize we are printing money every day with nothing to back it up. We exported our inflation to other countries as we print fake money and ship it off to other countries and they give us goods. They have an oversupply of our money and they have huge inflation. When they realize those dollars are useless, they will all rush back to us, causing the next collapse, only this will be global. Most Currency in the word is backed by the dollar which is backed by nothing. Bitcoin is only as expensive as it is due to News Hype and major Investment companies throwing money at it. Once they sell of to make profits, the whole thing will fall again. That’s why there is so much promotion. If people don’t continue to “buy in” then nothing is holding it up... Just like the stock market.
    0Reply
  • Jerry Shen
    Denver, CO · Member since 2016 · 114 posts · 99 votes
    8y

    @robert I agree I think crypto is an asset not a currency

    I think you are replying to the wrong thread tho :-)

    0Reply
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