I study trends to identify opportunities both as a real estate investor myself and a professional who has guided hundreds of investors over the years on investing in Denver, Colorado Springs and Pueblo. Hopefully understanding these trends through this Denver Real Estate Investing Guide helps you pivot and thrive in the market cycle. I made big changes to my investing strategy and rental portfolio based on the new market cycle that we’re in.
The new high interest rate market cycle changed the investing landscape. The goal of this guide is to outline the key market trends, opportunities and how to position your real estate portfolio accordingly.
Understanding current real estate market trends in Colorado is crucial for investing success. The markets in Denver, Colorado Springs, Pueblo, and Northern Colorado are following similar patterns, so I’ll speak to the overall trends. Our quarterly market trend packets and monthly podcasts provide more granular details and can be downloaded in our free Colorado Real Estate Investing Toolkit
Interest rates have shot up and remain high, making it very challenging to achieve positive cash flow. However, there are still opportunities out there, if you’re creative and willing to put in some sweat equity.
Video Version: 2025 Denver Real Estate Investing Guide
If you prefer to watch or listen to the Denver Real Estate Investing Guide, check out the video below. It covers this blog, but with a few more anecdotes and stories.
Strong Headwinds: New Market Cycle
After the 2008 crash and recovery, Colorado real estate had strong tailwinds for many years. But not anymore. 2025 will see these continued headwinds:
- High interest rates, with home prices staying relatively high
- Below average home price appreciation, likely 1-4%
- Below-average rent growth
- Big increases in property taxes
- Significant increases in insurance costs
- In 2023 and 2024 Colorado passed unfriendly housing provider laws
Will Denver Real Estate Prices Drop?
It’s doubtful that we’ll see prices drop, let alone a crash. Instead, the easy days of double-digit investment returns are over. Colorado’s price and rent appreciation have been higher than the historical averages for the last ten years. Averages are made over the long run. I expect price and rent growth will be below the historical averages for the next 2-4 years.
Important points about the above chart:
- The average-priced home in metro Denver in 1971 was $27,000!
- On average, home prices rise 6% per year, just a bit above inflation.
- Homes have gone up in price all but four years in the past 44 years! So, just because we’re at record-high prices DOESN’T mean prices have to fall next year. People who say that are wrong 90% of the time!
- “Experts” love to talk about a 7-year cycle. However, do you see one on the chart? Prices rose from ‘71 to ‘87 (16 years). They held about steady for four years. Then rose for another 16 years. Then dropped for three years. Note how large the 2006 – 2009 drop was.
Denver Deal Landscape and Investment Opportunities
Fact: It’s tough to find cash-flowing rentals in today’s market.
To keep things simple, I evaluated strategies using the traffic light rating system (red, yellow, green). The devil is in the details, but the simplistic rating system works well for a broad overview and new to this year’s edition of the Denver Real Estate Investing Guide.
If you have trouble viewing the table above, the same notes are pasted below.
- Single Family Long-term rentals:
- The days of putting down 25% and earning a decent cash-on-cash return are over. Expect 35%+ down for minimal cash flow.
- BRRRR (Buy, rehab, rent, refinance, repeat):
- Investors favor BRRRR strategies, but high interest rates and slim profit margins make finding suitable properties challenging.
- Short-term rentals:
- This segment has experienced a contraction in revenue and demand, prompting some investors to pivot to medium term rentals or selling. Newcomers are deterred by unfavorable economics and municipal restrictions.
- New construction investments:
- With new build and resale prices often on par, investing in new build townhomes or single-family homes has emerged as a viable strategy for those seeking to park capital with minimal property maintenance burdens. These investments can be viewed as secure holdings in prime locations. Expect a 35%+ down payment.
- 2-4 unit residential multifamily rentals:
- 2-4 unit multis outperform single-family homes in cash flow. While margins remain tight, targeting undervalued rentals can yield profits. Many Denver investors now seek fourplexes in Colorado Springs for better returns.
- Medium-term rentals (30+ days):
- Catering to traveling nurses, digital nomads, and those in transition, this niche has flourished in recent years. However, reports of softening demand and an influx of short-term rentals pivoting to this model are making it harder to find great deals. They are out there, just double-check your numbers and location.
- Room-by-room rentals:
- In the market cycle, individually renting rooms generate the most substantial cash flow. Many Denver-area homes present the potential for adding bedrooms, often in the basement, with minimal expense. Some investors have capitalized on this trend by curating theme-oriented rentals and fostering communities aligned with specific interests, such as women entrepreneurs or coders, yielding remarkable results.
- House Hacking:
- House hacking with a low down (0-5%) payment remains highly effective, allowing owners to generate income while living in the property before converting it to a full rental.
- 5-50 unit commercial multifamily:
- For BRRRR strategies, target 5-50 unit commercial multifamily properties. High interest rates and expenses create attractive buying opportunities as some owners are forced to sell.
- Residential Development:
- Land prices have dropped, construction costs have stabilized, and Colorado is experiencing a housing shortage. There are more buying opportunities for buildings to sell than for buildings to rent.
- Syndication / Passive Investing:
- Rising interest rates and the scale of commercial deals have made syndication investments more attractive and feasible for individual investors.
What’s the Best Denver Investment For You?
One of the most common questions I get is, “Chris, what investment should I make?” It’s a very complex question with many variables. There are three key variables that I use to guide investors:
- Bandwidth – How much time and mental space can you commit?
- Capital – How much capital do you have or can raise from investors/partners?
- Experience – What’s your experience in real estate, construction and running a business?
There is no right or wrong answer, depending on your situation and life stage. When I started out as a single person with no family, I had high bandwidth, low capital, and low experience. Fast forward to today, where I have a family with three young girls; I have low bandwidth, high capital, and high experience. I’m now the typical busy professional where time (besides health) is my most precious resource.
Recommendations for the Three Common Denver Investor Avatars
- HIGH bandwidth, LOW capital, LOW Experience: Often newer and younger investors
- House hacking
- Room-by-room rentals
- LOW bandwidth, MED-HIGH capital, LOW-MED Experience: Often busy professionals with limited time but want exposure to real estate
- New construction long-term rentals
- 2-4 unit multifamily rentals
- Syndications / Passive investing
- HIGH bandwidth, MED-HIGH capital, Med-High Experience: Often professional investors and/or landlords with portfolios
- 5-50 unit commercial multifamily
- Residential development
- Syndications / Passive investing (if they want to stay hands-off or diversify their investments)
Below is the matrix with the strategies rated based on bandwidth, capital, and experience.
The Next 2008 Style Crash in Denver Colorado?
While the spike in interest rates has not caused major downward price pressure, it has caused havoc for commercial real estate because they don’t have 30-year fixed interest rates. The rates are often locked for 1-7 years before they reset or float to current rates, which is often double their initial rate! Once you add on higher insurance and taxes, the deals often don’t pencil out. This creates distress… and opportunity!
Commercial real estate is a broad term. It includes industrial, retail, office, apartments (anything 5+ units is commercial real estate), ground-up development projects, self-storage, student housing, and build-to-rent projects. Basically anything that is not a 1-4 unit residential property.
This Wall Street Journal article from August 15, 2023 sums up the current opportunity: “Wall Street Is Ready to Scoop Up Commercial Real Estate on the Cheap. Firms are raising billions of dollars for funds to target assets with slumping values”
Graph: Denver Apartment Prices Have Dropped
The overall average price per unit declined 30% between 2007 and 2009. Prices have
been seasonally increasing ever since. The losses from 2007-2010 were regained by 2012. 2013-
2020 has an average +12% annual growth in price per unit. 2020-2022 has had greater appreciation
than we had expected. The 5+ unit average price has a very low unit count
The drop in prices probably excites you, but can also have you wondering how to access these deals. As an investor, I went through a paradigm and strategy shift: I can’t source and run these deals like I did with my residential investments in the previous market cycle. To access these deals they typically require an investor to scale their business through a combination of commercial brokers, lenders, partners and bigger teams.
Recommendations for the Three Common Investor Avatars to Invest in Commercial Real Estate
- HIGH bandwidth, LOW capital, LOW Experience:
- Very limited options. Unfortunately, it’s very hard to invest with low capital in commercial deals.
- Focus on residential while you build your capital and experience.
- LOW bandwidth, MED-HIGH capital, LOW-MED Experience:
- My biggest recommendation is for syndications / passive investing. Over my career, I’ve seen many investors with limited experience getting into commercial deals and not able to fully execute the business plan.
- HIGH bandwidth, MED-HIGH capital, Med-High Experience:
- If you’re looking for a new challenge and to stay actively involved, then look for opportunities in 5-50 unit commercial multifamily and residential development.
- If you want to go hands-off, then invest via syndications / passive investing.
What’s The Right Move For You?
The Denver Real Estate Investing Guide is great for general information, but can’t provide personalized guidance based on your situation and goals. That’s why we offer our free Real Estate Investing Strategy Consultation so you can get 1:1 guidance.
What am I doing as an investor?
I fall into the professional investor avatar (Low bandwidth, MED-HIGH capital, Med-High Experience). Even though I have the experience, I’m investing the majority of my capital passively via syndications and funds. Why? My bandwidth is extremely limited! Based on what I’m seeing, I’ll achieve about the same returns whether I buy directly or invest passively. I can make the same return, but with less time and less personal risk with passive investing.
