First time multi-family investor in Denver

[Parker F.]

Hey everyone, I'm so excited to be here. I'm 42 years old married with two young boys (5 and 7 years old.) My wife and I have decided it's time to get off the corporate hamster wheel and take control of our financial future. The hardest part of this is I am wearing a really comfortable (but heavy) pair of golden handcuffs. I have a very generous salary, amazing benefits, company stock that will continue to vest every year for as long as I'm employed. It's also a pretty easy/relaxed job but it's not fulfilling. So it's SCARY to think of stepping away from that. 

Our goal as a family is to reduce our expenses and start making real estate investments that start to replace my take-home pay.

Denver is a particularly tough market with high prices, low cap rates, so I'm hoping to connect with other people in this or similar markets to help me figure out the difference between a good and a great deals so I can deploy my capital in smart ways.

A little more about my background in REI. I bought my first home in Tulsa, OK in 2004 for about $90k. I had a $750 mortgage payment and rented out my spare bedroom for $450 a month and I was hooked on the idea of having other people pay my bills for me! Unfortunately not long after that I met my wife, got married and had to kick my roommate out. We did a large home addition (I was the General Contractor on it, and did quite a bit of the work myself) and then sold the house for a tidy profit and took our winning and moved to Denver. Since then, we've climbed the property ladder and are now in a home that is worth 10x what our starter home was. EEK!

I'm a big fan of putting your goals out there in order for your community to hold you accountable, so here goes:

• I want to walk away from my golden handcuffs by December 31st 2023 (in 4 years)
• To do this, I will need to replace $8000/month of after tax income
• I want to buy at least one property per year for the next 4 years

Thanks everyone!

[Steve K.]

Welcome to bigger pockets. I was in a similar situation as you in this area 5 years ago and now have 19 units here in the front range. Not enough to retire since I had 3 kids during that time too, and I’m just approaching 40 anyway so what would I do all day? I have left my day job for the most part, doing that freelance now and starting to segue into RE full time, combined with other investment vehicles (solar farms and stocks). I have to warn you, it’s not easy, and a lot of what you read in books and blogs, hear from gurus etc. is overly optimistic to the point of being unrealistic, or geared to how the market was 5-8 years ago and just doesn’t work in our current market. It will be pretty hard to find anything that cash flows in Denver without putting a significant amount of work into it in the form of either somehow sourcing off market deals or a “sweat equity”/value add type of strategy which requires a lot of hands-on work and some capital either doing the marketing or doing the fixing. Owning property in Denver area is more about appreciation, gaining equity through principle pay down, tax benefits from depreciation and if you’re lucky a little cash flow eventually as rents increase. That’s all well and good, great way to build wealth and a lot of people get rich investing here, but I wouldn’t say it’s realistic to replace your $8k/mo income through cash flow within 4 years as the forms of wealth building described above are longer term plays. The best strategy here IMO is probably value add, and doing the work yourself which is what I’ve done and finally seeing some income now. So if you don’t have the time and energy to take on a second job (which it inevitably becomes even just viewing and analyzing properties, making offers, etc. never mind once you actually own it and then the real work begins), I would honestly just stick with something truly passive like syndications, REITs, or plain old high dividend yield aristocrat stocks/ mutual funds, vanguard, SPDR etc.  During the past 5 years as I’ve noticed finding deals become more and more difficult, I’ve also been tempted to invest out of state in order to meet my goals of acquiring units, and I’ve looked into that strategy heavily. Through my research I’ve encountered many OOS investors located here in the front range who went that direction and literally all of them except one experienced frustration and near total capital loss, not gain and certainly not any “passive” income so I would not recommend going that direction unless you have a brother or blood brother or someone you trust on that level who is skilled in real estate in an out of state market willing to help you find properties and manage them for you. You would also want to understand that market intimately if you expect to succeed where most fail.  In my opinion investing out of state just makes everything harder and higher risk. Sorry I don’t have better news, it’s just a tough market to get started in right now nation-wide. I would think hard about your strengths and play into them. For example if you have the bandwidth and rehabbing skill to take on fixer-uppers that other investors have passed on because they’re in rough shape, then that’s a good strategy to pursue here but it’s a lot of work. If you’re good at marketing then you can set up a campaign to find off-market deals and really work your advantage over your competition there. If you have a large social network of older landlords looking to retire you might pick up a portfolio from one of them. If you have a great network in and knowledge of an out of state market where cash flowing properties can still be had, then maybe you can prove me wrong and make that strategy work. It’s not impossible but it’s certainly work. Good luck! Let me know if you have any specific questions on any deals you’re looking at or strategies you’re considering etc. Best, Steve