Purchasing single family house in the Denver area

[Jay Gil]

I live in California and am looking into purchasing a single family house in the Denver area. I have shortlisted 3 Denver suburbs(Littleton, Highlands Ranch and Parker).  I identified these suburbs primarily because of good schools and the fact that I should be able to find a property under 600k. The house will be managed by a property management company. The goal is to hold on to the house long term(10+ years and until it is fully paid off). Since will be my first investment property purchase, I was wondering if someone could provide me feedback on:

1. Would houses in these cities potentially hold their values in the long term? Which city should I prioritize? 

2. Any other Denver cities besides these that I should consider, something that might be a better long term investment?

3. Given the appreciation in the housing market, I am too late to enter the Denver housing market? 

Thanks!

[Ben Rhodin]

HI @Jay Gil! I would be more than happy to give some insight into the Denver Market. My first question would be what your goal is with this investment? I wouldn't bank on appreciation to be the motivation for investment. While the Denver area sees roughly 6% appreciation YOY, it's not guaranteed. I would say the areas you identified are strong performers, but definitely in the "already developed" category. If appreciation is truly your goal, then I would look into smaller pockets (Parts of Aurora, Athmar Park, Barnum, Ruby hill to name a few) that are currently being built up, and see more chance of great appreciation over the coming years. But that is still speculation.

The other thing that you'll probably start to find when you run the numbers (even more now due to the crazy year we had) is that traditional SFR rentals are not going to be cash flowing here in Denver, especially with a PM in place. The Denver market is a strong appreciation market, but if you want to see the cash flow as well you will need to get creative with your rental strategy. One of my personal favorites is the SFR turned into multiunit, whether through an ADU, or a mother-in-law suite in the basement. These work very well and aren't that much more work than a traditional SFR. They will typically be able to cash flow you over $500 after expenses and reserves. Other strategies that work well are STR (but have to be careful with regulations), medium-term furnished rentals, or rent by room. These all work here in the Denver Metro and will adjust what kind of property you will look for.

It's not too late to invest here in Denver, you just need to understand what kind of market you are playing in. Denver is not running out of steam, and Colorado, in general, keeps pulling people in. But like most investors, appreciation isn't really an investment strategy, you want to make sure the investment works from day 1, and if it appreciates then it's the cherry on top.