Looking for our first rental / income property in Denver area

[Doug Dillmuth]

Hi,

My wife and I are recently married and I sold my house to move into her house.  We now find ourselves in the fortunate position of having $250,000 in cash to invest.  The stock market seems to be over priced and we really like the idea of having a higher level of control over our investments.  The idea of being able to use leverage to grow wealth is also attractive.  We decided we are ready to begin the journey of learning everything we can learn about rental properties before we begin shopping for properties.  

The Denver market does seem to be pricey and we are somewhat unsure of the appreciation potential of properties.   Does it make sense to look for a lower value condo or apartment as our first property and to use our assets to acquire multiple properties or to try to leverage our savings to buy a single much larger property?  

We have a new baby and we both work full time so we would be looking for probably a newer property that might not need as much maintenance or rehab.  Does anyone have any recommendations on real estate brokers or agents who are experienced in evaluating investment property potential?  

We are looking forward to learning through Bigger Pockets as we progress towards the purchase of our first rental property.  

Doug & Renee

[Chris Lopez]

@Doug Dillmuth

There's no right or wrong in terms of investing in smaller properties vs one larger property. You can make a lot of money or lose a lot in either one. Consider:

1) What's your comfort zone?  A lot of people are very comfortable buying a single family home or a condo, because it's in their comfort zone rather than putting $250k as a 20% downpayment into a commercial or small rental apartment building.

I'd recommend staying within your comfort zone as you start out.

2) What fits into your personal finances and risk tolerance? What happens WHEN there is a major repair, vacancy, etc? Is it going to cause a domino effect on the rest of your finances and investments? You don't want one bad event to make you lose the property or worse! 

In my 20's I took every risk in the world. Now that I'm in my "mature" mid 30's, I won't do any investments that make me lay awake at night and worry.

Since you're a new investor and have a baby on the way, my recommendation is to stay conservative as you start. Take $50,000 and buy a ~200k property. After closing and it's been rented for 6 months, go buy another property. You'll learn a lot in the first deal about buying property and about yourself. It's much easier to scale up into more investments, than try to back peddle out of a big one.

There are quite a few great investor friendly brokers in the Denver area. Talk with a couple and see who is a good fit. Definitely reach out to Charles Roberts of Your Castle. He's an investor in Denver with a good portfolio and closed hundreds of transactions for investors. In full disclosure, I'm a bit biased because I'm working with him. I'm working with him because he's a good guy, knows his stuff, and is exactly where I want to be 10 years.

If you reach out to me, I can share a couple of case studies of recent deals that investors have purchased off the MLS in the Denver area. Also, I can send you over the spreadsheet that we use to analyze properties.

Chris