Guides-Denver Investment

Denver Real Estate Investing Guide  2023

Executive Summary

  • Average price is up 5% from last year (Aug 2023). The low inventory is doing a lot to support prices. No expected changes in dynamic.
  • Cash flow is harder to find. Achieving strong cash flow requires more creative deal making by active investors. The days of easy cash flow are over.
  • Rents are flat year over year
  • Opportunities for landlords with high equity to take money off the Denver market to reinvest.
  • Strong legislative headwinds for landlords at the state level and Denver county.
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Table of Contents

Historical Context

Homes and condos appreciated at 6.6% and 5.7% respectively, annually, over 50 years (1973-2023). Around 1986 the desire for single-family homes began to outpace condos. In the past few years, annual appreciation has been over 10%. That’s not sustainable. Prices finally pulled back from their continual climb since 2011.

Data Source: Recolorado.com; YCRE Analysis

Still in a Seller’s Market!

Inventory levels of homes and condos available for purchase finally started to increase in 2Q22. Inventory is no longer at record lows! Inventory has rebounded after a usual seasonal pullback over the holiday season continuing to build into the spring.

Data Source: Denver Metro Association of Realtors: DMAR Market Trends Reports (11 County Metro Area)

Showing Trends + Traffic

The second quarter started off with a slight drop in numbers, but nothing too noticeable. Listing agents are glad to see showings hold somewhat steady and mirror Pre – COVID numbers.

DENVER: INCOME PROPERTY PRICES

Rental Rates and Trends

  • Notes from Eric Ross with Ecospace Property Management
  • 75,000 apartment units coming online. Almost all Class A. Different property type than majority of landlords
  • Vacancy ticked up 1%
    • 7.5% global vacancy
    • Little skewed from taking over poorly managed units that are vacant
    • 6%
  • $3500/mo+ or below $1200/mo. High demand and move in a matter of days.
  • Time on market has ticked up for middle 1200 – 3500
  • Higher renewals than normal. 
    • Normally turn 25-35%
    • Now 14-18% turnover
    • More are staying put, with modest rent increases ($50)
  • Rent growth flat year over year. Similar to RE sales, rents peaked last year.

Legislative Headwinds for Landlords

  • Denver County: Rental licenses required multis (2022) and single family rentals (2023)
  • Lots of legislation passed at CO state level in 2022/23 session
  • Similar pipeline for next legislative pipeline
  • *If you’re self managing, stay on top of the rules and regulations!
  • Just recorded a podcast w/Daniel Muldoon, President of Colorado Landlord Legislative Coalition
    • MUST LISTEN!!

Strategy Matrix: Where is the Opportunity?

Fourplex w/ Seller Financing

Overview:

The fourplex is located in a highly desirable neighborhood, just south of downtown Denver. It’s newly renovated. Great location that is walkable and near many amenities. Potential for an investor or house hacker.

Investor Profile:

  • Experienced investor
  • Active investor

Fourplex w/ Seller Financing

Investment Property Details:

  • Type:  Fourplex
  • Config: 
    • 3 studios
    • One 1 bed / 1 bath
  • Location:  Wash Park
  • List Price:  $850,000
  • Purchase Improvements needed:  Minimal since it’s renovated
  • Seller Financing: 3.5% rate, 10 year balloon – 20% down
    •  
  • Why we like it:
    • 6.2% cap rate
    • 9% cash-on-cash return
    • Cash flow: $16,500/yr
    • *Self managing, no PM fee

House Hack and Room by Room

Overview:

Setup like bi-level with 4 bedrooms and 2 bathrooms upstairs and 4 bedrooms and 1 bathroom downstairs, but the HH is living in the smallest room the basement. The upstairs rooms go by 800 x 3 for the rooms that share a bathroom and 1 master for 850, and the downstairs 3 bedrooms go for 750 each. 

Investor Profile:

  • Experienced investor
  • Active investor
  • House hacker

Investment Property Details:

  • Type:  Single Family Home
  • Config: Setup like bi-level with 4 bedrooms and 2 bathrooms upstairs and 4 bedrooms and 1 bathroom downstairs,
  • Location:  Aurora
  • Price:  $530,000
  • Purchase Improvements needed:  
    • $5,000-$8,000
    • Add 3 bedrooms in the basement
    • Financing: 5% down
      • Used seller credits to buy rate down to 5.99%
  •  
  • Why we like it:
    • Live for free and cashflow $10,000!
    • After moving out: $17,000/yr cash flow!
    • *Self managing, no PM fee

Room by Room Rental (Investment, not House Hack)

Investment Property Details:

  • Type:  Single Family Home
  • Config: Setup like bi-level with 4 bedrooms and 2 bathrooms upstairs and 4 bedrooms and 1 bathroom downstairs,
  • Location:  Aurora
  • Price:  $530,000
  • Purchase Improvements needed:  
    • $5,000-$8,000
    • Add 3 bedrooms in the basement
  • Financing: 25% down – 8% rate
    •  
  • Why we like it:
    • $20,000 annual cash flow or 15% CoC
    • 10.5% cap rate
    • *Self managing, no PM fee

Partial BRRRR and Medium Term Rental

Overview:

Home converted into four apartments. Great location in Congress Park. Rehab budget is $100,000 (high side). Purchased with bridge loan, then rehab, and put long term debt for a high LTV, cash-flowing medium term rentals. MTR PM will manage 

Investor Profile:

  • Experienced investor
  • Active investor

Envision Advisors Agent:

Investment Property Details:

  • Type:  Single Family Home, converted to four units
  • Config: 2/2, 2 studios (option to add bedrooms to one), and 1/1
  • Location:  Congress Park
  • Price:  $970,000
  • Purchase Improvements needed:  
    • $100,000 remodel budget (high end)
  • Bridge Financing:
      • 85% on purchase price
      • 100% on reno budget
      • 10.5% rate
  • Long term financing:
      • ARV estimated: $1.2mm
      • 7.5% rate
      • Partial BRRRR w/<25% equity
  • Why we like it:
    • 7.5% cap rate
    • Cash flow: $2,000/yr + 
    • Professional MTR PM

The Appreciation Party Is Over!

Stale Equity = Low Return

Selling a Rental to Unlock Equity

Matt Amundson is Selling All Rentals to Go Passive

Download the Webinar Slides Here

Watch the YouTube Video​