High Cap Rates in Colorado

[Sebastian I.]

Does anyone know of or have any thoughts on finding properties with high cap rates in Colorado?

[Scott Trench]

I agree with Travis. Wait it out, and you might be waiting three more decades. I was told it wasn't sustainable in 2013, 2014, 2015, and 2016. I'm being told the same now. One day, the naysayers will be right, and my cash flow will have to help me ride out an unfavorable cycle. That's the day that I'll go out and raise money ;). Hopefully, the next few years of growing my portfolio slowly, by house-hacking and putting down large down payments, and proving a capable manager of my business will put me in position to borrow heavily from savvy investors in the next downturn, an advantage lost to the fellows hoarding cash or investing in a "cash flow" market. 

By the way, like Travis, I am not negatively cash-flowing, and have no intention of buying properties that cash flow negatively. I built up a $20K reserve over the first 18 months using profits from my first duplex, and am cashing out $1000-$1200 per month now (rents on that increased from $2200 - $2600, and my mortgage is about $1400 per month). My tenants have a lease that bakes in an extra $225 combined in additional rent ($100 increase for one unit, $125 increase for the other), and I'm still going to be under market rent. 

I think that investors sometimes lose sight of the obvious fact that cities like ours are growing rapidly and highly in demand. THAT will have to change over the long term for these investments to go south. Denver is NOT expensive. Try telling someone from DC, New York/Jersey, Philly, Boston, SFO, LA, Austin, Chicago, Miami, or the like that Denver is expensive and they will laugh at you. I chose and choose to live in this city because it is incredibly affordable compared with the prospects and lifestyle it offers compared with other major metros. 

Ask any renter in the city if they are betting on rents falling over the next few years. As far as gambling goes, I'd like to put myself in position to benefit from continually increasing rents, and not put myself on the other side of the table. I'll take that gamble at the expense of some current cash flow I might be able to get in a city far away. If interest rates rise, rents will certainly go up still further as homes become less affordable as well.