Doing a deal in November/Dec in Colorado?

Question

Hey BPers!Who here has done deals in CO -- Denver, specifically?     In the winter?  ;-)As I build my team and number crunch on properties I'm seeing, two things are a main concern:

a. The numbers here for a Brrrr are not working out.
b. If one did work out, I'm concerned about doing my strategy (MTR) -- or any rental strategy post-rehab -- in the winter.
I've spoken to some prop mgrs who are having a hard time (25+ days) to get renters in places.

This is familiar to me as I have a SFH rental and rented it out two years ago from May-July (a 14 month lease).

Thoughts from everyone here? Should I hold off on diving in the market to buy now?

Thank you.
tanya

James Carlson · Answer

Our Colorado STR and MTR clients have seen dips in their rents in the last 6-8 months. So even popular rent estimate tools seem a little inflated unless you're outpeforming the competition with what youre offering. Something to be aware of.

We've filled vacancies at our medium-term rental in Denver in January before, but had trouble in November and December, so I don't know if the winter is tough or if its simply the holiday season.

I'd be more interested in buying the right place whenever it comes up. I've got two buyers -- one buying a new build A frame in the mountains outside Colorado Springs and the other a new build in STR-friendly Wheat Ridge -- and both intend to do short-term rentals. They might have a little trouble in the first few months, but the long-term potential of the places was too much to pass up just to try to time the first few months of rent.

Dan Guenther · Answer

Hey @Tanya Maslach - Based on my experience, the winter months in Colorado present an excellent opportunity for investors. Competition is reduced as most retail (non-investor) buyers tend to hold off until spring, given the challenges of moving during the winter. Additionally, sellers during this time are often more motivated, as those listing in the winter usually have a compelling reason to sell. If you were to purchase a property in the coming months, by the time you close and complete any necessary renovations, you would be positioned perfectly at the end of winter, just as the prime rental and resale season begins. I've closed deals on Christmas day and by the time they were renovated and ready to go, it was February and coming into prime rental season.

Steve K. · Answer

We've bought over half of our properties during the holidays. The Front Range market has a very pronounced seasonality to it: March-June is "selling season" when the bulk of the listings hit the market and all of the retail buyers are out hunting. This is when the majority of the transactions for the whole year are done. Summer is usually much slower, then we have a smaller "second selling season" from early September until around Halloween. Sellers who are still on the market in Nov/Dec tend to be highly motivated and prices start dropping. So while the inventory is much lower (less properties to choose from for picky retail buyers), it's usually the best time for investors to negotiate a deal. Many flippers try to buy in the fall and sell in the spring to boost their profits for this reason. We typically see a 12% swing between December and April. I'm looking to pick up a property myself here in the Boulder market this fall.

It's true that it is much harder to find quality tenants during the holidays, so factor that in. But the quick equity gains that are possible by tracking the seasonality and "buying right" makes up for any potential lost rent in spades. It happens every single year. I'm amazed more people don't pick up on this and act accordingly.

Dan Guenther · Answer

Excellent @Tanya Maslach - let me know if you want to talk through any deals you have in mind. I'm always down to run numbers and analyze deals with other investors :)

Tanya Maslach · Answer

Dan!! I’m so so happy to get this advice.😊

I DO have a property (3-unit) that is working out on paper … I was planning on buying (BRRR) and renting as a MTR.

Your insight here keeps me inspired to go after it!

Doing a deal in November/Dec in Colorado?

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