Best Place to be a landlord in Colorado?

20 Replies

So hypothetically if someone wanted to invest in the surrounding Denver CO area, what are the better places to purchase residential multifamily (2-4 units) and why do you think they are the better markets for landlords?

Is there a high demand for renters in Castle Rock, CO?

Thanks in advance!

This sounds like a job for @Mark Ferguson . He is a very knowledgeable realtor in northern Colorado. His knowledge may go as far as Denver but let's give it a try.

Thanks @Jerry W. , I know a bit about the Denver market, @Anson Young or @Jon Holdman would know much more. In northern Colorado there is not much multifamily available at all. What is available is at terrible cap rates like 5%. I prefer single family in Colorado.

Mark Ferguson, Real Estate Agent in CO (#IA40029358)

@Jaren Barnes I have heard the the Pueblo area has reasonably priced Multi units, but it a much lower market C- or that range. I have no personal knowledge of that area.

Denver and surrounds are crazy overpriced right now if you are looking for cashflow.

Pueblo is cheaper but the rents are low.

Frankly, I would look elsewhere

hey everyone I really appreciate all the feedback!

What about Castle Rock or Colorado Springs are they better markets for land lording?

Originally posted by @Jaren Barnes :
hey everyone I really appreciate all the feedback!

What about Castle Rock or Colorado Springs are they better markets for land lording?

CO Springs is slightly better due to prices, Castle rock is about the same as Denver in terms of prices vs rents.

Anson Young, Real Estate Agent in CO (#14161n)

You could always develop real estate for buy and hold like we do. Or rehab and hold for single family. Our current project is a 8 unit apartment new build.

We create value by getting creative and renovating. Investing out of my natural market is out of my comfort zone.

Hard to find profitable buy and holds anywhere here now. I haven't really looked at Castlerock, though. I know one landlord who's sellsing because prices have jumped up so much. That leaves the question of where to put the cash, thoguh.

@Jaren Barnes I'll tell you the information I know. The Denver metro is building lots of apartment buildings. A report I saw from a broker said we are slated to add about 18,000 units in the next 12-24 months. That's just the ones under construction. There are another 6,000 units in the planning stage for that same delivery window. For perspective, the industry considers something in the range of 4,000 to 5,000 units per year to be "normal". So granted there was a 3-4 year stretch a few years ago where there wasn't even 1,000 units built. There is supposedly pent up demand from that.

There is lots of outside money coming to the metro area. People from the coasts (like you) look at the prices (rents and $ per door) and laugh because prices are so low compared to what they know.

Denver is growing. We've had something like 29 months of increased employment. We are seeing growth from the energy boom as well as immigration.

So while there are contrarians like Jon mentioned, there are many more optimists. If you are looking for cash flow then I doubt you will find it here like you would in other areas. Right now the market has priced a lot of growth in terms of rents. The prospectus on new construction is in the area of $2+ per square foot for rent. Those projects that are complete are getting that. There is a big gap between the entry level units which are renting in the $1.25 to $1.50 per square foot. Those units are going away as the properties are being purchased and upgraded to be on par with new construction or scraped for the land to construct 3 story townhomes/apartment buildings etc. It takes a pretty healthy wage for an individual to rent a small one bed. I'm seeing a transition from tenants in the service industry renting from me to those with lower paying professional jobs like teachers and GIS techs. The service industry workers are being price out of the urban core. The area in and around downtown Denver is very active with development both for apartments and condos. That area is where all the young people want to be.

Castle Rock is a bedroom community. Some families select if for access to Colorado Springs and Denver, some for affordability, and some for the rural lifestyle and small town feel. There are apartment buildings/condos galore and many subdivisions built in the last 20 years. Douglas County (Castle rock is the county seat) is one of the fastest growing counties in America. Currently it's outside of the service area for the light rail system. As Denver grows so will it. It offers more affordable housing for those working in the Denver Tech Center and the surrounding communities.

In general the RE market is hot, pretty much any way you slice it. Low days on market and increasing prices are the byword for most any section of the market and market area

Hope that helps.

Not sure my friend is so much a contrarian as he is taking some money off the table. Vs. 2008-10 time frame, prices are up quite a bit. That makes it pretty profitable to take some gains now. Trouble is you have to reinvest that money somewhere. And its really tough to find cash flowing deals here now vs. what you could find five years ago.

I think Denver may be shifting to more of a speculative market like the west coast. You'll be cash flow negative or break even but you may have better appreciation prospects than other areas.

@Jaren Barnes

I am an agent in Colorado Springs, and while fairly new, I am having a hard time finding serious cash flow properties for the two investors I am working with. There are always deals to be had, but a large market of investors so they are snagged quickly. For SFR,think along the lines of 100-200 per month cashflow, at least as for what I'm seeing in the SFR market. As for multi-families, rent's are relatively low due to the clientele, but purchase prices are high, so cash flow on these isn't that good either.

Take it for what it's worth, I'm still fairly new to the market here.

Jaren,

I am still finding SFR more in the Denver area. Prices are high in Castle Rock and cash flow is low. In Denver, you can find SFR with $400+ cash flow. I personally don't buy unless cash flow is $600+. Multi-units don't seem to have as much cash flow lately, but they are more secure when it comes to vacancy rates.

Living in Castle Rock, I can say, yes demands are there for rentals - nice ones. There are plenty of run down rentals no one wants. But there is not much for sale as the market is hot. You will need to find off-market deals to cash flow.

@Karen McC do you have an example of properties in Denver that have true cash flow of $400 with leverage? I don't mean phoney cash flow (rent - PITI), but the real deal after subtracting reasonable expenses. I'm actively looking right now and not finding ANYTHING here that is even break even.

I'm closing one Friday. We are paying 126K for a 3/1/carport. It will take less than $2000 to be up and running in 1 week. Renter moves in June 1 at $1300/month. Our PITI is $615 and we are paying $1500 out of pocket for earnest money. ARV is 165K. Not enough in it for a flip, but a great buy and hold for us as all the expensive work is done.

I'm finding the easiest houses to rent are near Fitzsimons or on the west side between Federal and Wads, and 285/6th ave. You don't want to watch the MLS - those houses are all going into bidding wars.

That's better than most deals I'm seeing. Not sure what your financing terms are, but I get a 5% cash on cash assuming an 80% LTV 30 year fixed 5% loan. I am accounting for property management in that, though. Self managing pushes the return to 14% cash on cash. Given the choice between that and deals far away where a PM would be required that's pretty good.

If you don't mind me asking, how are you finding deals? You're targetting the same areas I do.

@Jon - on the MLS believe it or not. It was our luck that the listing agent is not very good at pricing. It was a 'withdrawn' listing I was watching and contacted the agent to see if they would consider showing.

Mostly, we are watching NED lists and letting friends/family know we are looking.