First Time Denver Investor: 15% or 25% Down?
Our strategic partner Joe Massey joins us to analyze a deal for a condo in Denver. His client is just getting started investing and he helped her navigate the nuances of getting a loan for a condo. Listen to the episode to hear more about the deal and learn how lending for condos differs from other types of properties.

I recently sat down with Joe Massey, a residential lender and one of our Strategic Partners, to look at a recent deal he helped close.  His client is a first-time investor who wanted to buy in a condo in Denver to rent out.  Joe helped her navigate the sometimes-complicated process of getting lending for a condo. 

Listen to the podcast or watch the YouTube video to hear Joe walk me through several different scenarios. 

Three Learning Options!
  1. Listen to the podcast “#355: First Time Denver Investor: 15% or 25% Down?” on the Denver Real Estate Investing Podcast
  2. Watch the YouTube video (at the bottom).
  3. Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.

Investor Profile

This client is a first-time investor who works in an office and saved up about $60K to invest.  She read some books about investing, is working with a great agent, and came to Joe with some questions about the property she saw.  She wants to buy 2-3 investment properties so she has passive income when she retires in about 20 years.

Investment Property Details

Appealing Features of the Property

This is a 1 bedroom/1 bathroom ground floor condo in Denver.  Some people worry that ground floor units aren’t a good investment, but they appreciate at the same rate as every other unit.  For every one tenant who doesn’t want to live on the ground floor, there’s another one who doesn’t want to live on the third floor.

How Was the Deal Sourced?

This property was listed on the MLS.  It had been under contract but fell out.  It was back on the market for about 10 days when the investor and her agent saw it.  In total, it was on the MLS for 70 days.  Properties are often stigmatized when they fall out of contract, even though most of the time this is because something falls through on the buyer side. 

Property Contract Details

The condo was listed at $140K, which is what she initially offered.  During the inspection phase, they found some issues that required attention.  She was able to negotiate the purchase price down to $135K. 

Unique Underwriting for Condos

Underwriting for condos has a lot of nuances and requires an experienced like lender like Joe to successfully navigate.  The HOAs in condo buildings are essentially third parties that require their own evaluation. 

The first thing Joe looks at is if the HOA is involved in any litigation.  If they are, then he won’t lend to them.  He has no interest in joining someone else’s lawsuits. 

The second factor is how many units are delinquent on their HOA dues.  Being delinquent on HOA dues is a leading indictor for foreclosures; essentially, if a unit isn’t paying their HOA dues, they’re likely not paying their mortgage, either.

Then, he looks at how many units are in foreclosure.  If 20% or more of units are in foreclosure, the price of the other units in the building is going to go down.  It’s still possible to get lending to buy in the building, but Joe requires a 25% down payment. 

Next, he checks the investor concentration.  If more than 50% of the units are owned by investors, it can be a sign that the units aren’t being as well-kept as if they were owner-occupied.  This can lead to deferred maintenance issues that affect the whole building.  If this is the case, he also requires a 25% down payment.

Finally, he looks at single entity concentration.  If too many units are owned by one investor, then that investor has a disproportionate number of shares in the building, giving them too much control for a lender to feel comfortable with.  However, if those investor’s shares are spread out across separate LLCs, then it means there are different entities owning those shares.  In that case, it would be fine to proceed.

Property Financing Details

I used the Rental Property Spreadsheet, created by Joe, to run the numbers.

Property Analysis

Strategic Partner Deal Analysis Property Overview Spreadsheet Screenshot

The investor’s initial plan was to put down 15%.  However, when the condo questionnaire came back, they found out the building was 60% investor-owned units.  When condo buildings are over 50% investor-owned, buyers who are also investors have to put down at least 25%.  This wasn’t an issue for this client because she wasn’t at the top of her price range and had some flexibility. 

A larger down payment decreases the interest rate.  Her original plan was a 15% down payment put her interest rate at 4.875%.  When she increased it to 25%, her interest rate dropped to 4%, almost a full point. 

Property Operating Expenses

Strategic Partner Deal Analysis Monthly Operating Expenses Spreadsheet Screenshot

The client estimated rent at $1250 and planned on self-managing.  After overseeing the repairs, she realized that self-management was more work than she wanted.  She hired Ecospace to manage the property, and they charge a flat fee of 8%.  Even though paying for property management usually lowers cashflow, it didn’t hurt her in this case because they were able to get $1375 in rent. 

First Year Returns

Strategic Partner Deal Analysis First Year Returns Spreadsheet Screenshot

Increasing her down payment amount increases cashflow and the cap rate.  If she’d been able to put down 15%, she wouldn’t have any cashflow and the cap rate would be 5.9%.  These are decent returns, but not great.  With the higher down payment, her cashflow is $2600 a year and the cap rate jumps to 6.1%. 

However, cashflow and cap rate are not the only returns in real estate.  With her lower down payment, her overall returns, including appreciation, debt paydown, and depreciation are 34%.  By increasing the down payment, the overall return actually drops a bit to 29.7%. 

At the end of the day, though, this is a solid deal that sets her up nicely for the future.  The client is so happy with this deal she recently stopped by Joe’s office to tell him about her PM company and how she’s saving up to do it all over again. 


Finding a good deal in this market is tough, but it’s not impossible.  With a lender who understands both the market and all of the nuances on residential lending, clients can find properties that will align with their long-term goals. 

Connect with Joe

If you have any questions about residential lending, reach out to Joe.  You can connect with him via:

Connect with Us

If you’re ready to start looking for an investment property, reach out to us.  We want to help you find the right property to match your goals.

YouTube Video

First Time Denver Investor: 15% or 25% Down?

Analyze Before You Buy
Start Evaluating Properties Today with Our Free Toolkit
In a rapidly changing market, having the tools you need to help you analyze the data is critical. Know what the numbers will look like ahead of time so you don't buy a bad deal. Our toolkit is designed to help you thoroughly analyze any kind of deal so you can invest with confidence.
Start analyzing your Colorado investment properties today
Rental Property Spreadsheet • House Hacking Spreadsheet BRRRR Calculator Spreadsheet • Fix and Flip Deal Analyzer Investing Maps • Rehab Pricing Estimator
Start analyzing your Colorado investment properties today
Rental Property Spreadsheet • House Hacking Spreadsheet BRRRR Calculator Spreadsheet • Fix and Flip Deal Analyzer Investing Maps • Rehab Pricing Estimator
Chris Lopez
Chris Lopez is a Denver area real estate entrepreneur and investor, as well as the host of Bigger Pockets’ House Hackerz and the Denver Real Estate Investing Podcast.
Similar Post You Might Also Like
Podcasts - Denver
How to Cash Flow through House Hacking in 2024
Discover the top cash flowing strategies for house hackers in Denver with our 2024 Guide to House Hacking!
Real Estate Development from Concept to Reality | Deal Analysis
Real estate developer, Adam Fenton, joins us for an in-depth deal analysis of Narrate’s current development project, covering key aspects
Sign Up For Our Newsletter
What do you want to learn today?

All registrants get the recording sent to them automatically.