Hard to find deals that make sense.

[Neil Butterfield]

So, I am in the Colorado Springs area, is anyone else finding it  very hard to locate deals that make sense nowadays? With the high interest rates and house prices it seems almost impossible to find deals that cash flow. Is this the same in other markets?

[Nicholas L.]

@Neil Butterfield

Short answer - for on market deals - yes

[Caleb Brown]

Denver and surrounding cities is nuts. Off market or fixer uppers would be ideal. You can also go OOS. Kansas City is East of you, would be happy to chat about the area :)

[Sylvia H.]

Quote from @Neil Butterfield:

So, I am in the Colorado Springs area, is anyone else finding it  very hard to locate deals that make sense nowadays? With the high interest rates and house prices it seems almost impossible to find deals that cash flow. Is this the same in other markets?

 It's definitely the case in Connecticut. I find that foreclosures are a good bet but many need a rehab loan to get them repaired. 

[James Carlson]

Quote from @Neil Butterfield:

So, I am in the Colorado Springs area, is anyone else finding it  very hard to locate deals that make sense nowadays? With the high interest rates and house prices it seems almost impossible to find deals that cash flow. Is this the same in other markets?

I haven't seen a long-term rental in Denver or Colorado Springs in years that made real sense when accounting for all actual costs. It's one reason we talk up short-term rentals or medium term rentals. 

I do wonder if the tides are about to turn.  Price growth has slowed or reversed a touch. Meanwhile everyone who dropped out of the buyer pool has now joined the already existing renters, and that large demand foe LTRs is pushing up rents. So maybe the slowing home prices amd the rising rents will at some point mean cash flowing on that traditional rental again. In the meantime ... 

There are a lot of reasons why people want to invest in these markets. They like the long-term appreciation potential, they like investing near home, they want a second home in awesome Colorado, etc. But the gospel of cash-flow-or-nothing stopped a lot of people from investing in Denver or Colorado Springs.

MTRs and STRs can kind of get you the best of both worlds. You can still get some (or a lot) or cash flow if done right, and then you get the other benefits of owning in a strong market as well. It's not free or anything. Running an Airbnb is work, and you e got to know the laws so you do it in a city with some regulatory certainty. But it's one possibility as you wait for long-term rents to catch up.

[Eliott Elias]

Most growing markets like yours and Austin won't cash flow, doesn't mean you can't structure it to. Seller finance is more prominent than ever right now and you can negotiate whatever your heart desires 

[Jordan Moorhead]

@Neil Butterfield it is but don't give up. Push through and you'll find a deal!

[Wale Lawal]

@Neil Butterfield

The most evident impact of interest rates on real estate values is visible in the derivation of discount or capitalization rates. The capitalization rate can be viewed as an investor's required dividend rate, while a discount rate equals an investor's total return requirements. K usually denotes RRR (required rate of return), while the capitalization rate equals (K-g), where g is the expected growth in income or the increase in capital appreciation.

It is important to focus on mortgage rates because they have a direct influence on real estate prices. If you're a prospective homeowner or real estate investor, an easy way to research current interest rates is to use a mortgage calculator.

That said, it's important to note that changing interest rates affect numerous aspects of real estate. Beyond the price of your new home, interest rates also affect the availability of capital and the demand for investment. These capital flows influence the supply and demand for property and, as a result, they affect property prices.

Also, interest rates also affect returns on substitute investments and prices change to stay in line with the inherent risk in real estate investments. These changes in required rates of return for real estate also vary during destabilization periods in the credit markets. As investors foresee increased variability in future rates or an increase in risk, risk premiums widen, putting stronger downward pressure on property prices.

Read this article for more information https://www.investopedia.com/a...

Good Luck!

[Eliott Elias]

Figure out what makes sense to you, then seek it. Makes sense is a very broad criteria 

[James Carlson]

Haha, woah, I can't tell you what K is or k-g is. And I'm not sure, as others have said, that there are deals to be had out there. Or maybe there are deals, but you're going ro spend 6 months to a year trying to find it. 

I believe in KISS -- Keep It Simple Stupid. Biggest problem most people have, in my humble opinion is not having too little information but rather thinking they always need more info. Buy something. Not something stupid. But buy something that fits with the comps, that you can break even pretty well or that you can get creative with -- I'm talking STR/Airbnb or rent-by-the-room, etc -- and get started.

mqybe an unpopular opinion here, but ibdont care as much about cash flow. The biggest factor in real estate is not "buying right." It's time in market. Buy in a strong market. Hold for 15 years. You'll be good. If you can get creative in the interim to make some cash flow, then that's gravy. If you can get a good deal, then great. But don't overthink it.

My two cents.

[Melissa Robbins]

@Neil Butterfield I live in Denver and chose to invest in the Kansas City area. @Caleb Brown would be a good person to talk to about the KC market but feel free to reach out if you want to hear more about my journey and why I went out of market. I also believe Denver is not the place to invest if you are a first-time investor or early in your investing career. You won't get anywhere close to the 1% rule and there is no cash flow. STR and maybe house hacking could work here.

You could also try Pueblo as I hear many investors are looking there. The cash flow is there but the appreciation is questionable. 

[Jordan Malara]

@Neil Butterfield Colorado is definitely a tough market to find properties that cash flow in the traditional sense, but that's because cash flow and growth/appreciation are usually at odds. The only way to "beat" this and find cash flow in appreciation markets is creativity, which in Colorado looks like investing in STRs/MTRs, as others have mentioned. So I would say deals still exist, but require either a willingness to pivot to this strategy or a willingness to house hack in whatever way possible (multifamily, rent-by-the-room, house and cottage, etc). 

[Neil Butterfield]

Thank you everyone for the wonderful advise shared here. I have been out of state and off grid for awhile. I am not opposed to STR, I have two of them currently in Lafayette Louisiana (my wife's family is from there). I would like to find property in Colorado, mainly because it is a growth market. STR might be the best option given the current market. With rates going up to 6 to 7% doing a traditional BRRR model in Colorado may not be feasible. I am young in my investing career so I do not have much experience. I am a business owner in Colorado, and it sucks up most of my time, but it has afforded me the luxury of some capitol. I just need to be smart with that capitol.

Thanks again all...!
 

[Ricardo Hidalgo]

Quote from @Neil Butterfield:

So, I am in the Colorado Springs area, is anyone else finding it  very hard to locate deals that make sense nowadays? With the high interest rates and house prices it seems almost impossible to find deals that cash flow. Is this the same in other markets?

 Our area is still presenting good opportunities. Since we are in the slow seasons (fall and winter time) you can get good rentals for 3-7% off list price depending on the area. We recently put one pending around the million range making 132k on the books. In addition, I think building or acquiring lots near the beach will be a good equity play for resell or building for strong cash flow.