All Forum Posts by: Grant P.

 This is why we have been doing value add buy and hold.  We rehab the entire property, and hold it as a rental.  This makes the cap rate very attractive, and the unrealized gains are there as if we flipped it.  

I have to say I felt the same way the OP did when I first discovered BP.  What I quickly realized is that these rules of thumb do not apply to my market, specifically the properties I was interested in investing in.  Like the OP I was only interested in A+ markets in the urban areas of Denver, and was happy to take a lower return.

People have brought up good points, however I have never even come close to 50% expenses, the expensive urban houses are often smaller both in square footage and lot size. The neighborhood I specialize typically has 25x125 lots, 1000-2000 ft homes and command $350-400 PSF.  Repairs are no more expensive, maintaining a lot is no more expensive, property taxes in Denver are extremely low.  My most recent purchase is 1500 sq feet and just rented for $3200 per month on a 25x125 lot.  I can promise you I will not spend $1600 per month in expenses.

At the time I was just trying to learn as much as I could about real estate investment, and what I quickly realized once I started investing is to throw out the rules learned from this website and evaluate each deal individually.

Welcome from a Denver developer/broker.

BiggerPockets is a wealth of information, and the local networking the site provides is great as well.

Happy to help anyway I can.

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.

As to your original question, you typically cannot use borrowed funds to fund a down payment, but there are exceptions. The way you are proposing, I doubt you will find a lender.

@Adrian Tilley Properties become non-warrantable if they have too low of a owner occupant concentration. So no freddie/fannie loans.

This property is almost all investors, and I doubt that will be changing based on the difficulty to obtain financing.

Compass bank will write a loan for first time buyers with as little as 3% down, and firstbank will do IRA loans, so I don't see why you couldn't get a loan from someone, I'm just not sure who.

@Adrian Tilley I'll find one for you if interested. Message me if you would like.

This particular property is non-warrantable, therefore it is typically a cash deal. My client was a cash buyer, and it was never listed on the MLS, as I knew the seller.

There are a few local banks that will loan on it, and using a SDIRA is a possibility with Firstbank at 65%LTV for non warrantable properties.

I just brokered a deal for a client, 63k purchase price, rented before closing for 1250 per month here in Denver.

IMO people who hate investing in condos typically have never done it. Also no need for a property manager, as this hoa includes everything even basic cable.

On page 14 it shows a graph of historical apartment vacancy since 2003, while development slowed the market was never flooded.

On page 11 shows stats for office vacancy, supply, and and absorption.

I was invited to the State of Downtown Denver this year, and what they reported couldn't have made me feel better about the city of Denver, especially downtown and the urban markets.

We have always invested based on market trends, not cash flow figures.

A few highlights from the report:

Average age-33

Average household income-76k

Average rent for a studio apartment- $1,256

Average rent for a 1 bedroom-$1,405

60% of downtown employees walk, bike, or use public transport to commute.

142% growth since 2000

5x national average growth projected

6/10 Downtown residents hold a bachelors degree or higher.

Downtown denver is becoming San Francisco, and its doing it quickly. This being said, I believe most of our growth will be white collar demographics.

I've been lucky enough to watch first hand what investing in the city with little to know cashflow has done for us. Just by applying common sense, knowing the markets and paying close attention to the indicators, as well as doing value add major renovations we are sitting on gold mines in downtown Denver. No amount of math or modeling could have told us this, because at the time investors looked at these and didn't see the value.

The revitalization of the urban core is a reality here, and in my opinion most other major markets will follow.

This is kind of a ran't, but my point is if you're just looking for cashflow, SFR in B and C neighborhoods, thats fine however in my opinion I would rather have a solid asset with lower cash flow than neighborhoods that I see going nowhere(IMO anywhere that does not have a Denver address)

Even if you are not investing in Downtown, I believe these indicators are important.

A link to the report

http://www.downtowndenver.com/wp-content/uploads/2013/10/StateofDowntownDenverFinal_WebandEmil.pdf