All Forum Posts by: Phillip Bicker

@Rachael Britton This was posted almost 2 weeks ago now, but this advice is good for future deals or for others looking. 

You received good advice that while it is possible to go to the listing agent directly, I would not recommend it. Buyer agent's commissions are paid by seller and most often the listing agent will just work both sides (taking no reduction in fee/overall price) if a buyer comes without an agent - they will do so as a transaction broker in Colorado. Just remember that they have a history with the seller and they were the ones that originally employed them so there is no one advocating or working on your behalf...  Also, there is more to the deal then simply negotiating the deal - make sure you understand all aspects of the closing process if you attempt this without an agent (from inspections, to objections/clauses to get you out, to on record and off record title work, just make sure you know the full process which is what a buyer's agent can help with). For the offer itself, there is far more than just price, so make sure you fully read and understand the 18 page contract to buy and sell (standard contract in Colorado). 

As far as the 1 year agreement goes: if you already picked out a single property, an agent should just sign a buyer's agency agreement (exclusive right-to-buy) but limit it specifically to the property you are interested in. If you do not have a property picked out, the agent will want a contract because they will be spending significant time and effort helping you locate, setting up appointments to view, and touring the properties with you. This contract helps make sure that we are not wasting our time and will use a different Realtor when it comes time to purchase. 

Hope you were able to find a GOOD agent to help you with your deal!!

@Tammy Price Yes, you can get a second mortgage to invest. 

One option for you would be to use a conventional loan at 25-30% down on the investment property and simply get the down payment from a Line of Credit or second mortgage on your current home. If you have enough equity in your current home to cover the full purchase of the new home via 2nd or HELOC, you could do that as well (although I might recommend putting down about 30% and then seeing if you can buy another property as well). Just like was mentioned earlier, most mortgage brokers/banks will allow you to use rent from the new property to qualify for the loan, even if it is not currently rented, so the biggest issue is coming up with the down payment funds.

Hey Tom!

That is great that you are researching the market before moving to make the most of your time/money spent here. 

Right now your search is very broad and with so many areas of Denver still realizing 8-12% appreciation per year (or more), it is hard to pinpoint one or two locations without further information. Are you looking for a neighborhood that is currently fairly inexpensive and is spending significant money (and hope to profit from the development/appreciation). A few areas that are inexpensive but have major upside potential would be near Sloan's Lake West of Denver, Edgewater, around Lowry south east of Denver. At the lowest end, there are some very inexpensive homes around Colfax and I-225, and they are spending a lot of money in the area on the hospital (think tenants) and commercial amenities (appreciation). If you are looking for a more "family friendly" type neighborhood that may already be a little more expensive but growing, you may want to check out Lone Tree that is growing extremely quickly due to a number of new companies moving out here, including a very large Charles Schwab HQ. Castle Rock is on the southern end and has some great potential with a ton of development coming into the area recently (including year round skiing and one of the largest shopping centers in the US when the mall and outlets are combined). All of these neighborhoods are  1 hr 15 mins - 1 hr 45 mins from the best ski resorts (or shorter for smaller ski resorts like Loveland). 

If you are looking for multi-unit homes with great cash flow and don't care about being right in Denver, the best cap rates and returns (as well as availability) are down in Colorado Springs (about 1 hr south of Denver). The price point is also significantly lower. Entry level home around $250k instead of $350k for a similar home in many Denver Metro areas. Multi units with good cap rates are very hard to find in the Denver Metro right now. 

For MLS searches - the Denver and Colorado Springs markets are on different MLS's - if you are considering both markets, make sure to find someone that has access to both areas.

As far as Zillow Premier agent goes - it partially depends on the available areas and the price, but typically I would say this would not be a tool for new agents. You are paying for your profile to appear along side of 2 other agents on a home listing. Without recent sales or feedback, it is not likely that your wife would be selected over the other two. It is very costly ($500/month to get started in my area) and the ROI is around 50-150% in my area which may sound good until you consider the time and effort it takes to convert those leads, maintain/nurture those relationships, and close the deal(s).

@Ty Kayton Welcome to BP and congratulations on your first forum post. 

It sounds like you have a great start by learning the different strategies and looking to meet some current real estate professionals and investors in the area you are looking to potentially move and invest in! 

You mentioned that you are interested in N. Colorado and Denver - but may I suggest not ruling out Colorado Springs? There are some great Buy and Hold opportunities right now (assuming you can beat out the other 100 investors looking at the same properties! - make sure you work with someone that has strategies for you to stand out). I work in both Denver Metro and CO Springs and have found that the returns on MLS finds are currently much stronger down south and there are many more opportunities.

Good luck and have fun exploring the forums and podcasts - they have been an invaluable resource to me!

I do find that rents tend to lag behind appreciation. If you consider that tenants are often in 1 year leases, it is often the case that rents cannot be increased as quickly as the appreciation. I also find that many landlords are happy to rent to strong long term renters at a set rate and are reluctant to raise rents as fast as appreciation (often requiring new renters as the old ones cannot afford the new rent rates). 

While prices of investment properties should be based off of the actual rents received, or arguably the market rents expected, you will notice that properties with fewer units will be based more on comps than cap rates or rent multipliers. This is especially true for single family homes up to 4plexes that can be acquired with low down payment programs such as FHA if one of the units is owner occupied. Once you hit 5+ units, a property's value is very closely tied to rent multipliers and cap rates.

All this to say that I often find that properties with fewer units tend to appreciate faster than rents, but as you get more units, it is tied more closely to the appreciation rates for multi-unit properties.

Sorry a caveat I didn't mention that  will likely be an issue in this scenario. Both the value and equity of the purchase price must be equal to or greater than the home you sell to pay zero capital gains taxes. Even if you move all equity, the value of the home you purchase mist be equal to or greater to the selling price of the two homes you sell combined. 

Hello Joan,  as far as using the funds from multiple properties into one property, this is allowable for 1031 exchange - as long as you are moving like-kind from investment property to investment property (not owner occupied), so this part is perfectly fine. 

As for living in the unit to fix up before renting is going to be a potential issue. They might question the purchase as it appears initially as a personal/primary residence instead of an investment. I would strongly recommend discussing directly with a 1031 Qualified Intermediary to discuss how to address the potential work done on the purchase.  There are some here on BP or let us know if you'd like a recommendation. 

PM me for one that charges $50/hr and will likely be able to do everything for you!

You are partly correct. While you will not face a double tax for being in both California and Colorado, you will, in essence, be taxed at the higher tax rate (likely California). 

What happens: if you are a California resident when you sell, you will be taxed by Colorado and will pay Colorado rates. You then have to file in California and get a credit for the amount you paid to Colorado (essentially just paying California rate). If you sell while you are a Colorado resident, you can do a part-year resident filing for both states and just pay Colorado rates.