Should I sell my Colorado rentals and invest somewhere else?
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
Should I sell my Colorado rentals and invest somewhere else?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes@Mark Ferguson like to throw some other ideas out for you to ponder.
1. most folks that sell in high value areas for low value areas over time usually regret it. you got in at a good time..
2. take your positive cash flow and target one property and pay it off in a year.. keep doing that until your CO is free and clear your cash flow goes way up then.
I just look at all the property I owend in the SF bay area .. I did not need to sell when I did had I kept it ( bought when I was late 20 mid 30's.. now 60.. my equity would be off the charts .. I suspect the same would happen to you as well.
its not like you need the cash flow to live ( as I think you have a robust RE brokerage business that probably pays your bills) and your exotic car 's :)
Or ,
Sell it all now and pay the small cap gain tax and then use those funds to match up to a facility and start lending... you could get 2 to 1 leverage so .
1.3 nets you 1mil 1 mil leverage ( I use to leverage 4 to 1 but say today its 2/ to 1) now you have 2mil to put out in your local market at a conservative 15% thats 300k a year Net cash flow minus 60k for your 1mil borrowed net 240k a year plus you can be in cash in any one 12 month period if you needed to... so this triples your current cash flow.
Do some equity deals on your loans and you may make 500k with those same funds.
Take some of the rentals.. sell them and 1031 into premium timber ground in the northwest.. No cash flow but 12 to 14% Net yields all day long set it forget it for 25 years sell for big dollars..
there ya go a few things other than the obvious.. But I would be very reluctant to give up on your Denver rentals that you bought at the bottom of the trough. then buy rentals in FLA for double what they were selling for 36 months ago.
238 Replies
- Rental Property Investor · Asheville, NC · Member since 2015 · 307 posts · 127 votes10y
Mark,
I'm an advocate of not getting tied to any properties. Period. From the basic numbers you've thrown out Greater Tampa & Central Florida would give you a much better ROI for the equity you have in play. My advice would be to buy one here and see if you like the dynamics here in Florida, then and only then would I take the plunge and move everything over. Otherwise, you run the risk of 1031 exchanging your full portfolio and hating the management style of your PM (not that you can't change PM companies), you don't like the towns and the people you get from them, or just plain hate long distance investing!
All that being said, the clients that I'm placing are doing 20/25% down, and seeing Cash on Cash ROI of 18-35%, the ones I'm finding after they purchase are seeing a CoC ROI of anywhere from 12-40%.
Call or PM me if you'd like my thoughts on my market.
-Ben
- Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes10y
@Mark Ferguson I think you are probably right. I am not liking the rental rates. I would be afraid that long term that is a sign that prices will not remain that high. You might be at a peak. I would at least put some of them on the market and move to other areas.
So in short... I would take some appreciation profits at this point. Might do 1031 exchanges to not have to pay the taxes.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @Benjamin Pekarek:
Mark,
I'm an advocate of not getting tied to any properties. Period. From the basic numbers you've thrown out Greater Tampa & Central Florida would give you a much better ROI for the equity you have in play. My advice would be to buy one here and see if you like the dynamics here in Florida, then and only then would I take the plunge and move everything over. Otherwise, you run the risk of 1031 exchanging your full portfolio and hating the management style of your PM (not that you can't change PM companies), you don't like the towns and the people you get from them, or just plain hate long distance investing!
All that being said, the clients that I'm placing are doing 20/25% down, and seeing Cash on Cash ROI of 18-35%, the ones I'm finding after they purchase are seeing a CoC ROI of anywhere from 12-40%.
Call or PM me if you'd like my thoughts on my market.
-Ben
Thanks Ben, tampa was one area I was interested in as well as orlando, jacksonville, ft meyers pensacola and North coast.
- Rental Property Investor · Asheville, NC · Member since 2015 · 307 posts · 127 votes10y
Hey @Mark Ferguson,
I lump Brooksville down to Ft. Myers as one big zone. Good deals, and bad deals abound, but the people are for the most part of the same mindset, and you have A to C properties, you're hard pressed to find many D neighborhoods. Central Florida (the 98 & 27 corridors, Ft. Meade, Lake Wales, Avon Park, Sebring, etc.) have excellent cash flow, but are more C & D communities with C & D tenants. Jacksonville has come up over the years, but you have to either live there, or have someone you trust implicitly to invest there. Orlando goes from high end to garbage in the blink of an eye, and you have HOAs with restrictive covenants everywhere you look (Sarasota, our home base, is not much better), see Jacksonville. If you're referring to the Panhandle as "North Coast" (St. George Island, Santa Rosa Beach, Carrabelle, etc.) it's a great area for vacation rentals, but I personally wouldn't park my money there.
Unfortunately, I don't know enough about the dynamics of Pensacola to give an opinion, but the folks I've known over the years refer to Pensacola as eastern Alabama, not as a piece of Florida.
-Ben
@Mark Ferguson I am in no position to professionally answer but from others I know, kind of in your shoes, they tend to migrate to higher quality locations vs sheer volume. Many do not but they usually have less experience or work an area that a volume strategy works better. At your level perhaps eyeballing some long term future Denver tear down or reposition apts idea, C buildings in B+ areas etc. As far as selling your bread and butter now might be a good time... but to just to trade that for more of the same bread and butter IDK. How about apts in FL ok...
In those five years did you make more in cash flow or appreciation if you sell now?
Good luck!
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @Benjamin Pekarek:
Hey @Mark Ferguson,
I lump Brooksville down to Ft. Myers as one big zone. Good deals, and bad deals abound, but the people are for the most part of the same mindset, and you have A to C properties, you're hard pressed to find many D neighborhoods. Central Florida (the 98 & 27 corridors, Ft. Meade, Lake Wales, Avon Park, Sebring, etc.) have excellent cash flow, but are more C & D communities with C & D tenants. Jacksonville has come up over the years, but you have to either live there, or have someone you trust implicitly to invest there. Orlando goes from high end to garbage in the blink of an eye, and you have HOAs with restrictive covenants everywhere you look (Sarasota, our home base, is not much better), see Jacksonville. If you're referring to the Panhandle as "North Coast" (St. George Island, Santa Rosa Beach, Carrabelle, etc.) it's a great area for vacation rentals, but I personally wouldn't park my money there.
Unfortunately, I don't know enough about the dynamics of Pensacola to give an opinion, but the folks I've known over the years refer to Pensacola as eastern Alabama, not as a piece of Florida.
-Ben
Thanks Ben, nice to see someone with a great idea of the area. I have heard it can be very tricky in certain areas.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @Account Closed:
@Mark Ferguson I think you are probably right. I am not liking the rental rates. I would be afraid that long term that is a sign that prices will not remain that high. You might be at a peak. I would at least put some of them on the market and move to other areas.
So in short... I would take some appreciation profits at this point. Might do 1031 exchanges to not have to pay the taxes.
My main goal with rentals has always been cash flow. I am not worried too much about my current market peaking, but about a better use of my money.
- Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes10y
@Mark Ferguson In Collin County, TX near Dallas it is possible to buy a home for $60,000 - $70,000 and get $1,000 - $1,100 rent. Which means much higher returns than you are getting for your equity.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @Account Closed:
@Mark Ferguson In Collin County, TX near Dallas it is possible to buy a home for $60,000 - $70,000 and get $1,000 - $1,100 rent. Which means much higher returns than you are getting for your equity.
But what are your taxes? Mine here are about $700 a year on my properties. Those are still good numbers.
- Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes10y
@Mark Ferguson Funny you should mention that. I am paying property taxes online as we speak. For a property I bought last year for $70,000 it is valued at $50,000 for taxes. It rents for $1000. The taxes are $1309.42.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @Account Closed:
@Mark Ferguson Funny you should mention that. I am paying property taxes online as we speak. For a property I bought last year for $70,000 it is valued at $50,000 for taxes. It rents for $1000. The taxes are $1309.42.
That's not too bad. How n is the Dallas market?
- Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes10y
Mark, I focus mostly on the Collin County and Rockwall County areas. They have been two of the fastest growing counties in the country for years. Dallas County is different. There are many opportunities there as well but I do not focus on it.
If you want more information, I would simply google Collin County or Rockwall County.
There has been a huge amount of media coverage of the growth in the areas.
- Property Manager · Palmetto, FL · Member since 2015 · 15 posts · 11 votes10y
@Mark Ferguson
Have you thought about moving into multifamily? Often when owner get 15-20 units they start looking at moving into multifamily to take advantage of economies of scale and higher returns. Multifamily in Florida or Texas may be worth considering.
Would seem like a pretty easy task to sell...1031 into new rentals and use B2R financing. I do a half dozen deals or more in most major cities in the northern/central Florida cities per year. Most rental rates are pretty solid till you get to about avon park. Anything south of that on either coast tends to be a smaller return. 80k houses can rent for about 1k pretty easily. 10k trailers rent for 500ish. Good PMs are hard to come by.
A 180k house in the boom that dropped to about 60k in the crash is about 100k now a days. We have room to grow but its not nearly the easy money it was a few years back.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @Account Closed:
Mark, I focus mostly on the Collin County and Rockwall County areas. They have been two of the fastest growing counties in the country for years. Dallas County is different. There are many opportunities there as well but I do not focus on it.
If you want more information, I would simply google Collin County or Rockwall County.
There has been a huge amount of media coverage of the growth in the areas.
Thank you.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @Brad Bartlett:
@Mark Ferguson
Have you thought about moving into multifamily? Often when owner get 15-20 units they start looking at moving into multifamily to take advantage of economies of scale and higher returns. Multifamily in Florida or Texas may be worth considering.
I have, but I really like single family. If the opportunity was there I would consider multi.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @Leigh C:
Would seem like a pretty easy task to sell...1031 into new rentals and use B2R financing. I do a half dozen deals or more in most major cities in the northern/central Florida cities per year. Most rental rates are pretty solid till you get to about avon park. Anything south of that on either coast tends to be a smaller return. 80k houses can rent for about 1k pretty easily. 10k trailers rent for 500ish. Good PMs are hard to come by.
A 180k house in the boom that dropped to about 60k in the crash is about 100k now a days. We have room to grow but its not nearly the easy money it was a few years back.
I should be able to find better financing than b2r. Thanks for the info. I don't need easy money, but solid returns are nice.
- Investor · Plano, TX · Member since 2014 · 188 posts · 149 votes10y
@Mark Ferguson Hey Mark, I occasionally listen to your podcasts. Good stuff!
Can't you unlock the current equity that you have on your CO investments (with a HELOC or a cash-out) and buy properties without selling them. Last stats I checked, CO is still ticking away with a strong economy and positive job growth. I'm sure as a realtor, you may know the first signs of layoff based home sales.
Btw, I'm currently in your situation, rental portfolio with cash flow of around 10k a month. That's usually the magic number for inflection points in our business strategies; do we go multi-family, out-of-state, appreciation-focused-cash-flow, commercial, land or cover a totally different niche in real-estate. It all depends on our human appetite for risk and our appetite for fun. Personally, I'm sorta getting bored of SFR's and ready to dig into MF. It also gives me chance to exercise some syndication approaches (another idea that I picked from your podcast with Michael Blank)
So for a touchy-feely answer, look into yourself and find out what you consider fun and implore what kind of RE investor you want to be 10 or 15 years from now. Do you want to go from state to state chasing the almighty yield %, :)
- Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes10y
there are many 1031 exchange alternatives. Some involve no management responsibilities at all.
- Wholesaler · FL · Member since 2013 · 120 posts · 40 votes10y
@Mark Ferguson - I agree with @Brad Bartlett and look for MF opportunities in a location where rental demand is growing. The market at this stage of the cycle looks the same in almost every market (with the exception of tertiary markets) where the rent numbers make it hard to justify the purchase prices of most SFR's. However, if you want to stay in SFR's I would suggest working with someone who can locate deep discounted properties and give you some equity going in so you are not gambling on appreciation kicking in. The deals are there in Ft Myers/Cape Coral, Tampa, Fort Lauderdale, West Palm Beach, etc. but you need to do more than shop on the MLS to get them right now. Then, obviously, make sure you have an outstanding property management group on your team.
I have multiple properties that I am selling in the major (and some not so major) metros in Florida that all produce cash flow (I run each rental property through the BP Rental Analyzer for my BP friends) and all are at a significant discount to retail. For example, I am selling a rental in West Palm Beach for $99k right now that has a 10 year tenant (and wants to stay), needs no immediate work, has been rented for $1,400/mo for the last three years and is worth $120k right now. This is in a WPB market that is 1 mile from the Atlantic Ocean and is appreciating every year.
I'm a big fan of the Southeast over the next twenty years for job growth and rental demand and love to talk about cashflow! Let me know if you'd like to talk shop some more and good luck on your decision!
- Investor / Wholesaler · Nashville, TN · Member since 2014 · 1k+ posts · 667 votes10y
I recognize your website URL and I'm sure I listened to a podcast with you on it not so long ago which is probably why it sticks out. Maybe it was here on BP or maybe elsewhere but I don't remember all the details.
You have gotten some great advise so far and I'm sure you know what you want to do but just need a little bump in one direction or the other. From what I recall about the podcast I listened to, you are experienced and if you are thinking there is better money to be made elsewhere while realizing the appreciation you have seen you are probably right. Now where that drives you to is another story and will probably take some research and recommendations.
I am located and investing in the Pensacola, FL area so if you need some information about it let me know and I would be happy to discuss the area with you. This market has a lot of options when it comes to price point and cash flow. There are great deals to be had here, I would label the competition as fair (not a ton of buy and hold investors but they are certainly here, recently more flippers looking for deals), the appreciation and volatility of the market is pretty flat, high military presence and a very high demand for rentals from military and civilian renters. I find that the rental market shifts around the $1k/month range with under that being very high demand but worse tenant pool and over that the demand drops slightly but the quality of tenant goes up greatly. The $1,200-1,600 / mo is probably the best bet as that attracts the military members and young professional renters. Over about $1,600 and you reduce your tenant pool pretty well. If you want to be all in for $50k and rent for $1,000 it can be done here fairly easily, just not as easily as some of the midwest areas.
The main issue I see in this are is property management. I get questions all the time about who I would recommend and I don't have a great answer. I have found the local property management to just be fair. However, I am not actively looking for property management now so that may be why I don't have a good answer. I have just had a fair experience in the past with one of the larger companies here and have heard horror stories from most everyone I speak to about all the others. So that may sway your decision but if there are any property managers reading this and you want to come to Pensacola to open up shop, I am going to want one in a few years and I will send you a ton of other military business if you just treat my property like I would. I think this will be a thorn in your side most places you go though.
Good luck and if you want any more information about this area let me know.
- Investor · Denver, CO · Member since 2016 · 213 posts · 57 votes10y
@Mark Ferguson as more states legalize pot and since Colorado is building apartments everywhere I also feel that Colorado may be nearing a peek in rental opportunity. However, I would google Zika virus and look to see where WHO (world health Org.) thinks it will hit America. I think it was Brazil that had asked its people not to get pregnant for 2 years?? because of this mosquito. Anyway.. sorry to be a downer. But In the short term I.. myself would be looking North some... best of luck.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @Mike Makkar:
@Mark Ferguson Hey Mark, I occasionally listen to your podcasts. Good stuff!
Can't you unlock the current equity that you have on your CO investments (with a HELOC or a cash-out) and buy properties without selling them. Last stats I checked, CO is still ticking away with a strong economy and positive job growth. I'm sure as a realtor, you may know the first signs of layoff based home sales.
Btw, I'm currently in your situation, rental portfolio with cash flow of around 10k a month. That's usually the magic number for inflection points in our business strategies; do we go multi-family, out-of-state, appreciation-focused-cash-flow, commercial, land or cover a totally different niche in real-estate. It all depends on our human appetite for risk and our appetite for fun. Personally, I'm sorta getting bored of SFR's and ready to dig into MF. It also gives me chance to exercise some syndication approaches (another idea that I picked from your podcast with Michael Blank)
So for a touchy-feely answer, look into yourself and find out what you consider fun and implore what kind of RE investor you want to be 10 or 15 years from now. Do you want to go from state to state chasing the almighty yield %, :)
Glad to hear you like the podcast!
If I went multifamily I would most certainly have to go to another state also it is really tough to find anything in Colorado with decent cap rates. Commercial is the same way. I am not bored with single family. I just need a new market. I really love howith my current rentals have performed.
I could do a cash out refinance and have looked into to it. But I am wondering if I would get more bang for my buck if I sold and bought more.
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @David Bateman:
@Mark Ferguson - I agree with @Brad Bartlett and look for MF opportunities in a location where rental demand is growing. The market at this stage of the cycle looks the same in almost every market (with the exception of tertiary markets) where the rent numbers make it hard to justify the purchase prices of most SFR's. However, if you want to stay in SFR's I would suggest working with someone who can locate deep discounted properties and give you some equity going in so you are not gambling on appreciation kicking in. The deals are there in Ft Myers/Cape Coral, Tampa, Fort Lauderdale, West Palm Beach, etc. but you need to do more than shop on the MLS to get them right now. Then, obviously, make sure you have an outstanding property management group on your team.
I have multiple properties that I am selling in the major (and some not so major) metros in Florida that all produce cash flow (I run each rental property through the BP Rental Analyzer for my BP friends) and all are at a significant discount to retail. For example, I am selling a rental in West Palm Beach for $99k right now that has a 10 year tenant (and wants to stay), needs no immediate work, has been rented for $1,400/mo for the last three years and is worth $120k right now. This is in a WPB market that is 1 mile from the Atlantic Ocean and is appreciating every year.
I'm a big fan of the Southeast over the next twenty years for job growth and rental demand and love to talk about cashflow! Let me know if you'd like to talk shop some more and good luck on your decision!
Thanks David, I have always been able to find pretty big discounts on the MLS even with a hit market. I have 10 flips going in Colorado right now. The problem is the cash flow is not here even with the big discounts. I have even thoughthough about getting my license in florida of things progress and go well.
What kind of insurance and taxes do you see on that house you are selling?
- Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes10y
Originally posted by @William Allen:
I recognize your website URL and I'm sure I listened to a podcast with you on it not so long ago which is probably why it sticks out. Maybe it was here on BP or maybe elsewhere but I don't remember all the details.
You have gotten some great advise so far and I'm sure you know what you want to do but just need a little bump in one direction or the other. From what I recall about the podcast I listened to, you are experienced and if you are thinking there is better money to be made elsewhere while realizing the appreciation you have seen you are probably right. Now where that drives you to is another story and will probably take some research and recommendations.
I am located and investing in the Pensacola, FL area so if you need some information about it let me know and I would be happy to discuss the area with you. This market has a lot of options when it comes to price point and cash flow. There are great deals to be had here, I would label the competition as fair (not a ton of buy and hold investors but they are certainly here, recently more flippers looking for deals), the appreciation and volatility of the market is pretty flat, high military presence and a very high demand for rentals from military and civilian renters. I find that the rental market shifts around the $1k/month range with under that being very high demand but worse tenant pool and over that the demand drops slightly but the quality of tenant goes up greatly. The $1,200-1,600 / mo is probably the best bet as that attracts the military members and young professional renters. Over about $1,600 and you reduce your tenant pool pretty well. If you want to be all in for $50k and rent for $1,000 it can be done here fairly easily, just not as easily as some of the midwest areas.
The main issue I see in this are is property management. I get questions all the time about who I would recommend and I don't have a great answer. I have found the local property management to just be fair. However, I am not actively looking for property management now so that may be why I don't have a good answer. I have just had a fair experience in the past with one of the larger companies here and have heard horror stories from most everyone I speak to about all the others. So that may sway your decision but if there are any property managers reading this and you want to come to Pensacola to open up shop, I am going to want one in a few years and I will send you a ton of other military business if you just treat my property like I would. I think this will be a thorn in your side most places you go though.
Good luck and if you want any more information about this area let me know.
I really appreciate your detailed response! I was on the BP podcast, but it had been a couple years. I do my own podcast as well. Those numbers are what drew me to Pensacola after talking to another investor there. My biggest concern was the crime rate appears to be quite a bit higher than average. I have always liked getting high quality tenants and paying slightly more for properties than squeezing out every ounce of cash flow. Property management is obviously a concern.
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