All Forum Posts by: Kevin Dickson

"I agree completely with the list you have posted, however these are neighborhoods that are still a little sketchy for me."

I agree they are still a little sketchy. The thing is, the rental market is so tight right now that new folks to Denver won't view them as sketchy, because they really don't look that bad to a newbie. But the cap rate is more like 13-16% and then the inevitable gentrification takes over and starts causing a slightly greater appreciation rate than the city in general.

Cap rate is not how I would evaluate a flip. That's more for buy and hold.

"Once you factor in all the problems the extra yield is almost a myth in and of itself and the returns that made you buy in a suspect area are not there anyways.

Once my clients know what they will have to accept for the extra yield they say they will take a few percent less.

I know personally I don't want to buy in those low income headache areas."

The above is pretty good advice, but I think there is a way to take advantage of the inevitable gentrification coming to parts of Denver.

There are very few lousy neighborhoods left in Denver, and they are currently shrinking because of net-inmigration. Lots of folks are moving here with and without jobs lined up.

So here's the trend that seems pretty obvious to me: The "next hot neighborhood" is the cheap neighborhood that is adjacent to the current hot neighborhood.

Neighborhoods that have recently passed the point of easy "bottom feeding", which means prices will rise fast:

Villa Park
The east side of Overland
Baker, even the West side
Old Englewood
Most of Globeville
Chaffee Park
Sunnyside
West Colfax

Note that most of Southeast Denver never had homes available for significantly less than rent. There are lots of condos there, however, but that's a different topic.

So the only neighborhoods left with great upside:
Barnum
Overland, west of Santa Fe (next to the Platte River)
Valverde
Athmar Park
Ruby Hill
College View
East Colfax (east of Syracuse)

Lower Tier neighborhoods with good potential in the longer term:

Elyria/Swansea (has light rail coming)
Westwood (gentrification will start at the edges first)
MAYBE Montbello & GVR

All the neighborhoods I didn't mention are already picked over. Good deals can occasionally be found throughout the city, but it's just too much work to find them, and too much competition to buy them.

Padmapper is being threatened again by Craigslist.
http://techcrunch.com/2012/07/24/padmappers-not-the-only-one-with-legal-heat-from-craigslist-another-data-scraping-cd-letter/

The good news is that it is still working, still snatching all the best real listings from CL and filtering out the spam.

Check it out while it's still live: it's a useful tool that could usurp CL for Rental Search.

For a little more history if you are interested: http://blog.padmapper.com/

Craigspal has been shut down by Craigslist even though it doesn't make any sense.
craigspal.com

Padlister has recently solved every problem that Craigslist has always had for rental home and apartment listing and search.

In the process, it has added some awesome functionality. Padlister has recently gotten so powerful, I'm using it as my database for vacancies.
I can set up open houses and get prospect contact information without ever answering a phone call.

One small annoyance right now is that CL has blocked padmapper/padlister (pm/pl) links in CL ads. So you just have to link to your own website that in turns links to the padlister ad.

So try it! If you find answering the phone annoying (like I do) you can leave your phone # out of the ad. Prospects simply RSVP to your pre-scheduled open house. That act gives you their contact information and a custom bio or background info if they choose to leave it.

PM also links to a rental application that costs the prospect $25/person. That's how PM makes its money, but better them than a run of the mill tenant screening company that is slower and works off a tedious handwritten application. As more landlords accept PM rental applications, this will save house hunters millions of dollars in fees for apartments they don't even get.

So one annoying thing left to solve is that everyone tends to show up at the same time at the start of the open house. That can turn off some good candidates because they feel like there is no way that they have a chance at the apartment. So you're left running around trying to screen everyone a little bit, and telling your top choices to submit the online application.

It also makes automated CL ad writing utilities, like "Postlets" obsolete, because it has the same functionality.

Craigslist finally blocked padmapper/padlister (PM/PL) in June.
Eric of PM figured out a workaround and can bypass CL's cease and desist letter on a technicality. He already has millions of clients so he's plowing ahead "for the greater good", so CL listings are now all back on PM.

Craigslist has remained a staunch protector of the freedom of the internet and often has to force its (usually noble) values on its users. An archaic interface has remained one of its tools to maintain their status quo. They just happen to be wrong on this one. CL still sucks for apartment search because you can't see a quick map of the listings on the Craigslist site. They also get way too many fake and spam listings, so apt. search on CL is a big time-waster.

Personally, I think the Padlister utility is so useful, that I can see it making CL obsolete for apt. search.

I'm starting a new thread about PL, so please chime in!

I especially like this from the HUD strategic plan: "new business model that creates more flexibility to provide greater choice for renters and attracts private capital to increase the number of affordable rental homes"

To me that sounds like a move away from the current policy of discrimination against investors.

Nathan,

I do admire your respect for rules, and agree that we should follow them when they exist. But history has shown that not all rules are best for society in general, and since conditions change, sometimes rules should change.

Chris,

I agree, HUD's policies should evolve in response to a changing world.

Sorry for giving the impression that I "sound like one who argues you only broke the law if you get caught".

Response to Chris Martin and Jon Holdman :

I agree with all your points. Unless I misunderstood, the OP wasn't talking about the loan, just the purchase offer/contract.

If the investor pays cash, there's no risk to a lender, or loan fraud.

To make my point in a slightly different way:

Why should HUD have a rule that a home is offered first only to owner occupants? (assuming a cash sale)

The conventional wisdom is that an owner-occupied house will be maintained better than an investor-owned home.

Well I find that reasoning specious, unproven, and unfairly biased against professional, experienced, and diligent investor/landlords.

So I think we are all in agreement that no one should commit loan fraud.

As investors, however, I think we also should be in agreement that living in the home you own doesn't automatically make you a better homeowner.

Of the foreclosures I've looked at recently, the ones in the worst condition were the ones that were owner occupied.

Again, when a law is continually broken, the law itself must be reconsidered along with the enforcement methods.

Some rules make sense. But look hard at this one - supposedly an owner-occupied house is better for the neighborhood, and better for the country. That's why they created this policy. (Is it a law?)

Well, this policy discriminates against investors. That's not fair, is it?

In 2012, in many neighborhoods in Denver, a professional landlord owner is much better than an owner-occupant buying with 3.5% down and living paycheck to paycheck.

Note - I'm not saying that breaking the rule is OK. I'm saying that let's worry less about the rule breakers and more about eliminating a rule that doesn't make sense anymore.