Buying in an extremely hot market

[John Hamilton]

I am looking for a property to get in on a house hack. I live in Colorado Springs and the market is insane here right now. Within a few hours of the listing being active it will have multiple offers and usually ends up selling for about 30k over market value with how competitive it is. What do you guys think about buying in a market like this for a house hack? Or should I wait/search in the surrounding area that is less competitive but may not be as easy to find renters?

[Darius Ogloza]

Is the surrounding area cheap because no one wants to live there?  or is it some still yet undiscovered paradise that is sure to increase in value once it gets on people's radar?  if the former, no.  If the latter, yes.  As an investor, it is your job to try to read the tea leaves.

[Robert MacNeal]

We have the same problem here in Portland, ME.  Using the calculators her on BP, the purchase price would have to drop about 30% from current values just to break even on cash flow.

[Daniel Haberkost]

@josh hamilton housing is in short supply across the country and this is especially true for us as 80911 was rated the hottest zip code in the country a week or two ago. 

However, this is as much of a good thing as a bad thing. You're not the only one struggling to get a property under contract. One of my house hacking tenants that has been renting a room from me for a year was only supposed to be here three months. The only reason he's still with me is because the market is so hot and he can't get a place within his budget. 

The state of the market makes it extremely easy to find good tenants and keep them for the long term. Plus, the criteria that you're looking for is a little different than the standard buyer which helps a bit, what parts of town are you looking in? Many houses do sell well over ask but that's not true for them all and I just saw a property pop up this morning as "price decrease" on the MLS that would work perfectly for house hacking.

-Dan

[John Hamilton]

@Daniel Haberkost I appreciate it! I have been focusing on the north powers area but I’m open to anywhere that makes sense. I saw some houses in the new developments southeast by fountain so I’m gonna go check them out today. It does make me nervous about paying over market value since I would have to wait a year or two to even break even. However, my strategy is to focus on cash flow and not sell any properties for the foreseeable future so it may make sense to get into a property that I can still cash flow on.

[John Hamilton]

@Darius Ogloza it’s hard to say. I lived in woodland park and my neighbor had an air bnb that was rented almost every night so that may be an option but I’d rather have a long term tenant. With most people working in the springs it may be harder to find renters the further away you get.

[Lynn Currie]

@John Hamilton talk to some local folks about why they buy and what they buy. Maybe the strategy is an appreciation play, not a passive income play. Also remember we're in a weird time in the housing market and understanding how that's affecting Colorado Springs could be very important. For example, are you seeing Covid related bumps and are the multiple offers related to the current hot housing market? Are there multiple offers because it's the summer selling season and traditionally the market slows down and house prices drop X percent once that's past?

Normally I would say find some active local meetups, but most of those probably aren't being run right now so I would say find some local FB groups where people are talking about your area.

Overall though, go by the numbers. Figure out what makes sense for each property and stick with it. Don't make emotional decisions just because the market is hot UNLESS it works for you in your specific house hacking situation and you're okay with that.

[Jaquetta T Ragland]

@John Hamilton are there ANY properties out there that’s been on the market for a long time...usually 40+ days in a hot market?

[Dennis Cosgrave]

By definition, if a property has been on the market 40+ days, it is not a hot market, or there is something seriously wrong with the property.

[James Carlson]

@John Hamilton

I live and work in Colorado Springs, so take what I say with a grain of salt, but I think you should stick with it. House hack a reasonable home in Colorado Springs, have others pay your mortgage and watch your home value appreciate over the next few years as tons of people continue to move here.

At the risk of sounding like a real estate agent ... are you working with a good real estate agent? They should be guiding you through this tough market. You should be getting out to properties early, your agent should have conversations with the agents to discern what the interest is, you should be discussing other tools to use to get noticed in competitive situations.

I get not wanting to overpay, but paying over asking price is not always overpaying. Again, you (or your agent) should check the comps to know how crazy the pricing is. There are certainly some crazy situations out there, but not all of them by any means. A really crazy property in Colorado Springs might -- might -- go for 10% over ask. But that's rare, and hell, we saw 13% appreciation from last July to this July. 

And I also worry about the lost revenue and lost equity that comes from waiting a year to buy because you can't find the perfect under-market place. 

Okay, I'm off the soap box. Keep at it!