Bad time to buy rental in Denver?

Question

I currently own one rental property in Denver and have been working to purchase the next one in a month or two.  It is obvious that the housing prices are through the roof!  Anything and everything I have ever learned about investing is buy low, sell high.  It does not seem to be like a good time to purchase a rental property unless it is a low price junker that needs work.  What are your opinions?

Bill S. · Answer

Bought a 2 bd condo with an HOA of $157 per month that includes the heat. Paid $80K using 100% private money financing at 8% interest only for one year (payment $533.33). Put $5,000 into it in repairs (carpet, paint and appliances). Rents for $256 per week on a year lease. This was an off market purchase. I bought three properties in 2016 that I am currently holding. Those that say it can't be done will end 2017 without any properties. Those that figure out a way will be on the path to prosperity.

Travis Sperr · Answer

My last two purchases where in February 16 ( little more than 6 Months) - Bought 2 town homes in Denver.

Both right off the MLS

Property 1 - $162k plus 12k in repairs - rents for $1,850 (increase coming in March should get to $2,000 with included utilities section 8, HOA $180 per month (water, sewer, trash, exterior maintenance, snow removal and landscaping)

Property  - $188k plus 2k in repairs - rents for $1,900 HOA $180 per month (water, sewer, trash, exterior  maintenance, snow removal and landscaping).

I put about $60k down on each as a part of a 1031 exchange - payments are PITI $1023 and $1138 respectively on 15 yr notes at 4.5%

Matt M. · Answer

Deals can be had in any market. I'm buying one or two as soon as my flip closes next week and my credit score goes back up after paying off everything related to the flip.

I just put an investor under contract on a condo $30k below market(off market deal), and she's looking for more. Don't try and time the market; if the numbers make sense, pull the trigger.

Bill S. · Answer

We all have opinions. I think it's a fool that tries to time the market. It's also foolish to ignore the facts. My advise is to get educated on the market. By that I mean learn the forces driving our market and what is happening in the market. One place to do that is the Pine Financial Summit put on by @Travis Sperr and company (I have no affiliation with the group). It happens in the spring and fall. He posts it here. At the last one, there were a couple of presentations that touched on this topic and indicated we probably have 4-5 years of reasonably strong growth ahead in the single family world barring some national or worldwide economic crisis. Don't take my nor anyone else's word for it. Dig in and learn.

I completely agree with @Russell Brazil, significant wealth is made in rapidly appreciating markets. If you know what's going on you are in a position to take advantage of it.

Most posts responding to these types of questions are opinion. Granted some of the opinions are based on data but some are based on anecdotal info which can be helpful to fill in the holes. Real data is how you have an edge above the rest. Most folks follow the herd, everyone is buying so now must be a good time. The movie "The Big Short" is worth seeing if you haven't already done so. Some are contrarian, everyone is buying so now is a good time to sell. Figure out what the data says and follow that.

Travis Sperr · Answer

@Jason Hawkins there might be 100 other threads about your exact question. Prices are up, but so are rents. So long as you are purchasing on sound principles, keep strong reserves and are buying for the long term you will do well. There are other markets that may perform better with lower barrier of entry but you have to do what you are comfortable with.

One of the best parts of rental real estate is you don't have to buy at deep discounts like flippers, 10-15% below market value works well and is very doable.

Bill S. · Answer

@John Wanberg I have an annual lease and collect rent every week (instead of once a month) using a debiting service that takes the money from the tenant's bank account. This happens once a week and I set it up to occur when they get paid. The weekly rent amount is the monthly rent divided by 4. If you do the math you end up collecting 4 "extra" weekly payments throughout the year. This is clearly disclosed up front with the tenants. I did this because they didn't have great credit and it seemed like the best way to stay on top of things with them.

Micki M. · Answer

@Jason Hawkins as everyone has said, timing the market is a guessing game. My approach is to get clear on my specific needs and timeline.  What kind of cashflow do you need to make to be happy with a purchase?  Are you prepared to hold that property for the long term?  What happens in your worst case scenario (lose your job, suddenly need to move away?).  If you can answer those and find a property you like that meets your criteria, then you can buy.  The other question to ask is, if you don't buy in Denver now what is your alternative?  How will you keep your money working for you?  Let us know what you decide to do.

Scott N. · Answer

@Bill S.

You got carpet, paint, and appliances for $5k? Yes I'm sure they were rental grade but that seems like a very good price. Were you happy with the contractor and with the outcome of the work?

PM heading your way

Sean Tarpenning · Answer

I think it depends on your expectations. What are you wanting to get out of your investment? Cash flow? Equity? Both?

Bad time to buy rental in Denver?

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