Struggling to get started in Denver Metro

[Jason M.]

I am really struggling to get off the ground in the Denver metro area; And I've read mixed reviews about going out of state for rental properties. (I read "Long Distance Real Estate Investing") Thoughts? Is it better to wait and save the ~$60K for down payment here? Is it even worth it with all of the unknowns around COVID and renters?

Aside from lacking the large down payment, I'm in pretty good shape. (No debt except my primary residence, 800+ credit score, 15K in emergency savings, maxing out tax deferred accounts every month, and saving $3K/month for investing.)

I have a realtor, and we have setup a search based on my goals; I probably analyze 5 or 6 properties every morning. I've found a couple that work, but I just can't get past the initial investment in this market. 

I have read all of the BP real estate investing books (Including "The Book on Investing In Real Estate with No (and Low) Money Down" ) and I'm looking forward to next weeks podcast. "Live in an Expensive Market? You CAN Invest in Real Estate! Here's How!"

Can anyone give me some advise to get over this hump?

[Chris Lopez]

@Jason M. If you're analyzing properties for the 1 or 2% rules, you're wasting your time. What types of properties are you looking at? What type of searches are you on?

Detached Single family homes - These are the worst cash flowing properties in Denver (4 to 5 cap rate), unless you go with the room by room rental strategy or find a place with an ADU or mother in law suite (5 to 7 cap). The room by room rental strategy gives you good cash flow, but it's too much work for me and a lot of my investors.

Condos / townhomes - The cap rates continue to get compressed here as prices rise. Condos are usually among the better cash flowing. I bought one in March and it cash flows around $5000 a year with real underwriting. (~ 6 cap). These are usually turnkey or need <$5 or less in rent ready costs.

Multiunits - We're buying these at low 5 to 6 cap rate. Out of all the properties, we're seeing the easiest value add for these. We have two under contract now (6 and 11 unit) that good properties that cash flow, but have upside with raising rents and doing upgrades. These can be done one or two units at a time to keep the cash flow coming in.

I'll send you a few examples.

A common mistake I see with new investors is the way the are analyzing and they keep analyzing the exact same type of property.