All Forum Posts by: Alex Beaulieu

@Alex Beaulieu 1) get pre approved for the scenario you are considering to make sure all looks oK and so you have time to fix any issues if there are any 2) a 3% down ARM is not likely to be a program that exists ....you will liekly be using a 30 yr fixed rate if putting 3% down 3) changing a property to a rental after owning it for some time is fine to do ( make sure to try to refinance this property BEFORE changing it to a rental

Don't be afraid of an ARM. I've used them a bunch. My lender has a 10 year that hasn't been beat. ARMs get a bad rap from the 1-3 year arms that hit in 2008. There's a duplex just south of me on the market at $650k, so you can find them if you know where/how to look. On market is showings some deals finally.

Just my two cents, I'd run, fast and far, from an ARM. Not much room really for rates to go down so you're only gambling on the wrong side. An ARM on a $750,000+ loan takes a somewhat manageable payment to untenable after even the smallest rate reset.

I don't believe this market will see big drops like has happened in the past. This last run up feels very much like what has happened in past cycles where prices shoot up, plateau, maybe come down a bit, but never drop significantly. It's unlike the chaos of '07-'08 with horrendous loans and bad practices. 

And if I may ask, why Ken Caryl/Littleton? Great area but there are many great areas around Denver metro that might be a bit more affordable (relatively speaking). And if you have no designs to live in the home long term, why not buy something that would provide a better rental situation when you decide to move east? As mentioned above, you won't cashflow a home at $750k with 3% down so buy a townhome or something less expensive that may be a better investment property long term. Or maybe even consider a house hack duplex or something like that? 

Okay @Alex Beaulieu.  Thanks for being open.  To answer your question...I study market cycles as well as historical trends.  Lately, I've been reading and watching youtube videos of and by Ray Dalio.  He has made a pretty sound argument that history repeats itself and it's more layered than we know. I agree, the bull market we've experienced is different than that of the early 2000s. I've also lived in Colorado most of my life and started investing right at the height of things in 1999.  

So, I'm jaded. And conservative. Why? I saw - first hand, people losing their shirts because they were over leveraged. Both my husband and I were laid off at the same time and that was not in our "plan".  I always tell beginners that the market doesn't care what you think but you can learn the market by watching, with an open mind, what is what. 

@Alex Beaulieu hello!  Very sound advice here from @James Carlson. There will be tax advantages too.  However, one thing that it sounds like you need to hear is that the market doesn't care about your "plan".  I don't mean to sound harsh but it is widely thought that we are at a top of a market here in the Front Range. Bidding wars, competing with all cash and institutional buyers are still happening in areas like Ken Caryl. Investors never pay retail.  So paying full market price could be a make or break.  What if home values, or just, rent rates fall?  Are you covered?  Appreciation is icing on the cake.  The successful investors I see, buy right, meaning you make your money when you buy.  You just collect it when you sell;)

@Alex Beaulieu

Congrats on your impending big choice to buy in the Denver area. I've got clients looking right now in the Ranch Plains area of Ken Caryl. Beautiful homes. Great community. 

You will sign documents at closing where you say that you intend to live in the property. Sounds like that's exactly what you will be doing, so you're fine on that front. If you live in it for a year, no one will stop you from moving out and making it a rental. However, some lenders will balk at you trying to get a second primary residence loan within one year. They may think you were either lying on the previous mortgage or lying about the current one. Two years is a solid amount of time and no lender will blink an eye.

The other thing -- and maybe the biggest thing -- about living in it for 2 years is that it gives you the flexibility to then sell within 5 years and avoid paying 15% capital gains tax on the proceeds. So I would plan on living there for 2 years and then -- if you want to sell at some point in the near future after that -- you do so before the 5 year mark of when you bought it. 

Finding tenants down there shouldn't be a problem. But be aware that you're not likely to cash flow. Most homes in Ken Caryl are in the upper $700k, early $800k range. Even putting 20% down, you're looking at a $4,000 mortgage. Rents for a 5br in that area are probably between $3500-$4,000. So you're really just buying and holding in hopes of appreciation.

I wish you the best in your search. Cheers!