All Forum Posts by: Patricia Miller

@Ralph R. Pardon me for digressing from the original post, but, being a newbie, I would like clarification. I understand the value of leveraging as much as possible. However, I am not clear about the idea of "the more equity you have, the less your return is." I know that when you do the formulas for a new purchase, this is true. But, how does this concept apply to buy and long-term hold? Obviously, the more money you put into and hold in a property,  the less $$ you potentially have to play with in terms of getting another property (assuming you don't have very deep pockets). Also, of course, there is value in having your tenant pay your mortgage and provide you cash flow. That said, if you make an oversized downpayment from the get-go, what is meant by "return" if you do not sell the property? I'm not suggesting I would want to do that, I'm just still trying to nail down these concepts... 

Thanks for any assistance.

I have learned so much from this post! Thanks for posting @Jennifer McPherson and everyone who has offered such valuable advice. 

@Matthew Botos Good question. As long as the wheels are turning, I predict you will problem solve your way into the Denver RE market one way or another. 

I would like to expand your question further to any who care to weigh in...
1) Is there data/evidence to show that rents in the Denver area are, indeed, higher in close proximity to light rail service? And...
2)  Is there a consensus or difference of opinion about how future light rail service will affect rents in the near future?

I think it is common to assume that proximity to light rail service increases prices, but do we know for sure that this is true - and is this true for purchase prices as well as rental prices?

@Eric Olsen  I love this idea! Fun to hear when folks are thinking outside the box. Good luck!

@Amir B. I am in the same boat - looking for a duplex in the Denver area (or other property that looks like a "deal") and find most of the listed duplexes to look like a bad idea. I truly wonder how people are buying and making these work. That said, however, I also think it is easy to get caught up thinking that buying your own home has to be a good deal - especially once you start immersing yourself in the world of RE Investment - bearing in mind that most people buy a home just to live in it to suit their individual needs. You do have to live somewhere - whether you house hack temporarily or buy your own home in Denver or elsewhere. 

The question is, what is your intent and what is your exit strategy with house hacking (or whatever strategy you go after)? If living in half a duplex is a short-term prospect to allow you to develop the property for investment purposes, then analyze and time this accordingly. But, if half a property gives you a reasonable place to live while you continue building your portfolio - then maybe just analyze the value of that other half of the property given the idiosyncrasies of the market in that area? Presumably, what works for one half would work for both halves of a duplex if you move out, although some duplexes are uneven - one with more sf or bed/bath combos, etc. Is your intent to house hack repeatedly until you build a portfolio of cash-flowing or equity-building properties? 

I am a complete rookie - so take my comments not as advice - just as food for thought. I recently bought a condo in Denver that I know is not a good deal (currently) - but given the crazy appreciation in the market, it might well be in the not-too-distant future. Meanwhile, I have somewhere to live once I get to Denver (next month). I believe there is also something to be said for getting your feet wet, as long as the numbers show some potential in one way or another.

Good luck!

Hello @Matt Anton, I have been in your shoes now for 5 months. Like you, I am determined to find buy-and-hold properties in the Denver area. I think what I am realizing is that although determination and hard work will often lead to success, no amount of either one of those can change the market conditions in a particular local. Not only are market conditions formidable - but there is no shortage of people willing to pay waaaaay above asking price for properties as they come on the market. I'm wondering where those folks are going to be in a year. The duplexes are the biggest head-scratchers. How can you pay upwards of $500K for a duplex that might rent each unit for $1500 (or less) and keep your head above water?? I'm sure there are deals out there and the more clever (and connected) among us will scoop those up faster than you can say jackrabbit. But giving up will not lead to anything - so keep going and stay smart! (I need to listen to my own advice, as well).

Update: Appraisal has come in at $212K - just $1K under contract price, $13K over list price. And so it goes in Denver. @Kevin Grinstead @Travis Sperr @Dan Mackin @Bill S. @Joshua Meyers

Hello @Dan Mackin - I don't expect much from this property - any 2/1 condo I can find rents for don't exceed $1500 and are often even far under that - except for in some of the more pricey areas. So if the purchase price today is around 2K - this is not a cash flow property. Will rents catch up anytime soon? I would probably be foolish to expect that. Because the property is in pretty good shape, albeit with older appliances/finishes there might be a possibility that in a year or so, some upgrades could produce a small profit if the trend continues with rising property values as it has in the Denver area for the past few years.  Meanwhile, I could have a place to live to see how it plays out.

Thanks for the advice @Travis Sperr - your points are well taken. The condo is cosmetically in good shape; it's just that at 13 years, I know there is work to be done at some point in the not-too-distant-future to update. The HOA seems to be in decent financial shape from what I can tell and, yes, I'm willing to live there at least for the short term (maybe even a year or 2) to see how things progress in Denver before either selling it or renting it. I am from the east coast with my current home going on the market within a few weeks and even though I know that one can do REI from a long distance - as a hands-on person, that approach doesn't appeal to me. (Plus, we want to live in CO and we would need to land somewhere to get started!) It's also clear that MLS deals in my current price range are either hidden from view or non existent. I will need to learn how to find them in Denver via other means or look in different areas.

Anyway, a low appraisal will terminate this effort. Comps in the area go both ways so it's hard to tell what will happen. (Side note, a property in this small complex with an additional 150 sq ft and a 2nd bathroom just listed at $260 - that seems crazy!)

Thank you @Kevin Grinstead. I would be interested to know how yours works out. The Denver market is insane. In our case, we had the escalation clause that brought us to $213K from an asking price of $199K with 20% down. Turns out the competing offer was $212K with appraisal protection of 10K. As for our appraisal clause, we said we would make up the difference up to $20K (cash) from the appraised value to maintain the original loan arrangement - and I'm assuming that was the difference between the contract price of $213K and appraised value. If I understand this correctly, if the appraisal comes in at $192K, we can walk away as that would be $21K over contract price. There is something very unsettling about buying something for a price that is more than $20K over appraised value - even in Denver. Can we assume that these property values are going to continue to skyrocket??? Also, everything in the property is original and will need replacing in the near future. I don't have the experience to know if new furnace/water heater/windows/appliances would alter the appraised value to make this a rational deal under these circumstances.