Northern Colorado Real Estate Investing Guide - Denver Investment Real Estate

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SEPTEMBER 1, 2023

2023 Northern Colorado Real Estate Investing Guide

Executive Summary

What do you need to know about Northern Colorado?

Northern Colorado market has significant investment opportunities
- BUYING NOW = BUYING EQUITY
- Winning strategies include
  - New construction opportunity to buy equity
  - House Hack (Single Family and Small Multi)
  - Long Term Rental Single Family Rental
Positive Drivers for Northern Colorado Real Estate include
- Highest population growth in Colorado
- Job growth and new big investments drive future growth
Market Considerations
- Interest rates limiting sellers from putting on market
- Barrier to investors seeking cash flow
- More renters because they can’t afford to buy
- Still too little supply of houses
Opportunity Costs
- Waiting until rates come down, will lose time in the market.
- Pent up demand – when rates go down, rush of potential buyers will push prices up and will need to compete again at higher price levels.

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Rental Property Spreadsheet • House Hacking Spreadsheet BRRRR Calculator Spreadsheet • Fix and Flip Deal Analyzer Investing Maps • Rehab Pricing Estimator

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Northern Colorado Real Estate Trends

Northern Colorado detached single-family homes price increase is 2x Denver.

Northern Colorado attached single-family homes price increase is 6x Denver.

Big 5 Average Price is Up 9.18% / YR

Northern Colorado is made up of 5 counties (also called the Big 5) which includes Loveland, Longmont, Boulder, Fort Collins and Greeley. Home prices in the Big 5 are currently averaging 9.18% in appreciation per year.

Big 5 City Homes: Historical Context

The 3 primary drivers of growth in Northern Colorado’s Real Estate Market are

Market as a Brand: Each market is a collection of perceptions, similar to brands embodying certain qualities. Northern Colorado, including places like Denver, Fort Collins, Greeley, and Colorado Springs, carries a distinct character and momentum meaning they’re more likely to grow.
Job and Population Growth: Efforts are being made to attract job-ready young individuals, fostering a stronger workforce. This initiative is crucial as businesses rely on quality employees for growth. The region is focusing on establishing partnerships with high schools and colleges to provide businesses with skilled workers directly from these institutions, promoting an easy transition from education to employment.
Economic Environment: The state maintains lower unemployment rates compared to the rest of the US, indicating its favorable economic position.

Population Growth

Northern Colorado accounts for 51% of Colorado’s growth. With 15% coming from Larimer county and 36% coming from Weld County.

“New” is driving Northern Colorado Real Estate up including new construction and new investments into the region.

Jobs Drawing people to Northern Colorado

Source: U.S. BLS, Local Area Unemployment Statistics

More tech companies and large institutions are moving to Northern Colorado including Ursa Major Tech, Vestas, Agilent Technologies and Microvast amongst others.

Tech & Higher Paying Jobs

Northern Colorado Driving Co Pop Growth

“New” is driving Northern Colorado Real Estate Up

Strategy circle: Where's the opportunity?

False Seller's Market

Are we in a false sellers market? The short answer is Yes. When we’re looking at months of inventory (MOI) if it’s under four months, we generally consider that a seller’s market. If it goes four to six months, we’re starting to move to a balanced market. If it’s above that, it’s a buyer’s market.

But there’s something else that’s going on right now that isn’t always obvious to people. Which leads us to our next point.

Artificially High Interest Rates

There’s an artificial play happening on interest rates. This is causing sellers to avoid putting their properties on the market because they may not get the value they’re seeking for them. Thus creating what we would normally look at at first glance as a seller’s market. It’s actually a buyer’s market out there.

Pick Your Strategy Wisely

Northern Colorado Deal Analyses

Deal #1: Buy $63K Equity

Overview

Investor client was looking to add to their rental portfolio. Denver prices and interest rates create challenges so the client wanted to see if Northern Colorado has lower prices and if new construction can provide discounts/incentives. Looking for a property under $500K and close to cash flow positive, if possible, could self-manage.

Investor Profile

Investor with a couple Single Family Rentals
Wanting to purchase in 2023 and continue to build portfolio
Looking for lower price points and if New Construction has deals and low maintenance
Consider Self-management

MLS has most of the properties but not all the incentives.

Investor Friendly Agent has additional builder contacts and knowledge

Investment Property Details

Type: Single Family Detached – New construction
Config: 4 bedroom, 2.5 bathroom
Location: Severance, CO
Concession: $13,571 (3%)
List Price: $477,375 + $25K options = $502,375
Discount: $50,000
Purchase price: $438,803

Why we like it

Gain $63K equity day one
New construction, low maintenance
Good up-and-coming area

Rental Analysis

Notes on monthly income:

Potential pet rent
Could self manage
Maintenance in reserves

Total Return Y1 $22.3K /13% ROE

With Refinance

Refinance to 5% in 12-24 months – cashflow positive
Total Ann Return after Refi $29K /16.7% ROE

Conclusion

Good deal to acquire equity and lower cost of entry in higher interest environment.
Opportunity to self manage, add pet rent to get closer to cash flow positive.
Opportunity to refinance in 12-24 months and have some positive cash flow.
Deal shows that buying now is buying equity and gets better with refi,
When rates decrease people will bid up prices, further benefiting this property through greater appreciation.