All Forum Posts by: Chris Freeburg

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@Cherie Tormey I agree with @Greg Scott. With that much equity, if you sell, you can cash out and buy a BRRRR in a cash-flowing market and then refinance to pull money out for the next one.

And, not only is right now a great time to sell given the state of the market, it is also a good time to take advantage of 1031 exchanges that may be going away.

It sounds like you already know the best way forward...

@Jason De Jongh Have you considered investing here in Denver?

I work with local investors getting into real estate and those moving to Colorado from out of state, and this market is only going to continue to grow. There's a lot of beauty of investing where you live: you get to know neighborhoods, are able to personally see and inspect properties, and it's easier to build a team you trust. 

Another perk to investing where you live? House hacking. Buy a property where you can live in one space and rent out the other. Could be a multifamily, like a duplex,, or a single family home with a separate entrance to a basement or an ADU, where you could potentially airbnb. You can take advantage of the low down payment and interest rate required for an owner occupied loan. It's hard to beat the cash on cash return.

@Sam Nayyer I'm no lender, but I can tell you that they're going to want an offer of employment letter before pre-approving. Past 2 years of W-2's won't be a big issue as you were in school, but you'll need a job offer first, and then I'm sure underwriting will want to see paystubs as soon as you start.

As far as markets: If I were your age, I would look at where I want to live. I don't think you can go wrong with any of those markets as far as real estate goes, but they are very different places to live. Colorado = mountains. Texas = ppl who head to CO for the mountains. Denver & Austin are young and growing cities. You've got spring training, golf, and snow birds in Florida and Arizona.

Where every you end up, house hacking is for sure the best path to building wealth. It's what I do in Denver to build my real estate investment portfolio and what I help many of my young clients with as well.

@Cole Leonida People sell off-market for various reasons: a relationship built over time, sellers trust the buyer will close (that actually means something, especially in this market where buyers are bidding beyond their means and can't get make the financing work), sellers have specific needs like moving, or problems they need solved immediately, etc.

What can you do to add value?: the biggest thing is whatever built that relationship in the first place. They know you, they like you, they trust you. The things you mention to make the transaction easier for them certainly help. Money certainly smooths over a lot of problems, but it's not everything that people are looking for. How do you find out what they are looking for and communicate this? This is a skill great realtors have: ask the right open-ended questions to find out what they're looking for.

At the same time, continue to be honest and up front with them. Know your terms: Will you have an inspection contingency or buy as-is? I never advise no inspection, but if it's new build, there may not be many issues, so you could have just an inspection termination deadline: You can terminate if there is a red flag, but they won't do additional repairs. (I often frame inspections as delayed maintenance.)

You may not get a "discount," but a fair market price in this fast-appreciating market may actually be less than the house would sell for if it were to go to market. Prices increase quickly in bidding wars.

You mention rent rates: have you looked at the market for mid-term rates (1-6 months), i.e. travel nurses, etc.? We're seeing an influx of remote workers who want to live in a cool place like Colorado and now have the work freedom to do so.

@Tyler Batchelder 6.7% appreciation last month and almost 20% since last year is definitely ridiculous! (And also what happened here in Denver in March. Full stats here)

We are experiencing the level of appreciation in one month that we would expect for an entire year. Why is this happening? It's supply and demand. We have roughly 2 weeks of inventory in Denver right now. That means if no new homes come on the market, at this rate of closing, they'll all be gone in 2 weeks! Low interest rates, millennial buyers, and quality of life in Colorado are driving the demand.

Will things cool off? Well, prices may not continue to soar at this rate forever. At some point, more listings will come on the market as vaccinations roll out, people feel more comfortable with strangers in their home. However, when that happens is anyone's guess. Still, no one expects the market to drop, so don't count on any bubble bursting. This is just not a repeat of '07-'08 housing crash market, but don't just take my word for it.

Look elsewhere? We're seeing these same trends in healthy markets all over the country. Dense cities like New York and San Francisco might be the exception, and if I lived there, I'd be buying.

Time to sit on cash? There's a reason for that saying about keeping your powder dry; you have to have capital to pull the trigger. I won't tell you what to do, but I'm not sitting on the sidelines. I'm actively looking for my next investment, but I think your post is pretty accurate and there's no way around it: good time to sell, tough time to buy.

@Cole Leonida Do you know why they're moving? In addition to having the opportunity to buy off-market at a reduced price, you also have an opportunity to gain some additional insight.

If you can get the home under contract for an under-market rate and the rental numbers work out, it sounds like a solid play. As you mentioned, in SFH's we've seen a 6.7% price increase in just the last month and ~20% in the last year in the Denver metro area. Denver is definitely an appreciation market, so anytime the rents cover the mortgage, I tend to think it's a good deal. Of course, there is always the possibility that this investment will appreciate and never cash flow, so just be prepared for that possibility. And, with appreciation, you don't realize that return until you sell. Especially if it's a new build, there likely won't be many avenues to add value and push rents higher. I like to use rentometer as a way to gauge market rents.

It could be a good move. Just consider your exit strategy and the use of capital that you'll be tying up in the home. You may be able to use a HELOC down the road, but that's down the road. @Matt Leber makes a great point about the dangers of trying to time the market. Even now, I am seeing listings that were overbought less than 2 years ago and are back on the market now. When you sell, you'll need to take into account 7% costs of realtor commissions and closing costs. I prefer the long-play or value-add that emphasizes time in the market; there's a significant more risk trying to time the market.

@Ryan Eldridge This might be worth a 5 minute phone call to a local real estate attorney. They would know the answer immediately and I bet they likely wouldn't charge you because you might need their legal assistance (hopefully not). An investor client of mine had a similar issue and a PM I trust told me if it's month-to-month, only 28 days were necessary. However, I like to stay in my lane, so I recommend confirming with a lawyer. @Drew Fein Can you help?

@Randy Dubiskas 

Denver is definitely an appreciation play and not a cash-flow market. But, here's another way to frame the investment: If your STR cash flow covers your PITI + CapEx, what has the greater cash-on-cash return?

The Denver market has an average appreciation rate of 6% over the last 50 years. In just the past month, we've seen 6.7% appreciation for SFHs in Denver and almost 20% in the last year. That's bookoo bucks.

Certainly more expensive to get in, but if you're constantly traveling to Denver anyways, I wonder if it's not worth a second look.

Good luck on the Prescott STR investment! If it goes well, maybe you're next one is in Denver?

@Kyle James Just sent you a PM with my go-to for tile, bathroom, basically any remodel. I'm happy to help with anything else you need. Just give me a holler. I'm always looking to help!