Lets break down my Top 5 benefits an owner occupant of a Denver multi family building can take advantage of currently:

1. More inventory is on the market now vs any other time over the past few years. Going into 2023 I predict this will stay the same; however, I also anticipate more Buyer activity as we get into the Spring selling season.
2. Loan limits on 1-4 unit properties recently increased allowing Buyers to bring less $$ to the table for their down payment.
3. Average rents are still staying strong in desirable areas around the Denver metro area. Having strong rents in your building could help you live mortgage free (especially possible in triplexes and quads).
4. More properties in need of CapEx fix up/repairs providing sweat equity opportunities for those willing to renovate.
5. Currently less competition (although I’m still finding myself in multiple offer situation in A+ location) which I expect to last until springtime. Buyers generally have the ability to negotiate price/inspection/rate buy downs/etc.

Have you been thinking about occupying a Denver investment property yourself? Reach out and lets discuss this strategy in more detail, you’ll be setting yourself up for future wealth and opportunities!

This year the Colorado Senate voted down proposed rent control. Denver is currently twice as affordable than San Fran, as well many other cities in CA. Current clients of mine with ties to CA have told me this rent control bill actually creates the exact opposite result as intended: many long term renters have ‘sweetheart deals’ in place because they’ve been responsible over a long period of time and their landlord gives them a break because of it. Now, these landlords are forced to raise their tenant’s rent to market rates because they won’t be allowed to increase rent over 5% moving forward with rent control measures in place.

If you’re weighing your options on potentially selling in a rent controlled state, lets discuss how Denver investment properties could be a better solution through a 1031 exchange. Just interested in purchasing investment properties? Lets discuss some great opportunities I have as well.

Project website with specific details regarding high end finishes, as well anticipated completion date, to be released soon.

The majority of folks I speak with think this tremendous sellers’ market and super-tight inventory is something new and something that’s going to come to a head and suddenly erupt overnight. Neither is true. Here’s the truth: we are OVER 12 YEARS PAST THE BOTTOM of our last real estate cycle as you can see clearly from the below graph.

Just because the Denver Post is suddenly aware of the real estate market and Zillow writes screeching articles about the tight market in order to sell ad space don’t be fooled into thinking this is something new. It’s not. It is a logical continuation of a market that is reacting correctly to the overselling we saw between 2006 and 2008, dropping 25 percent during that period. It’s doing exactly what real estate market cycles do, go up and go down over long periods of time. But remember, over the past 40 years residential real estate appreciation has averaged about 6 percent per year and there is no reason to think that it is going to change over the next 40 years.

We tend to erroneously think of market cycles in short terms, spiking and crashing over narrow periods of time and generally messing everything up. A quick look at the last market cycle shows clearly this is not how real estate works. Real estate cycles tend to move in much broader periods. The previous market upturn was from 1990 – 2007, 17 years! This is why predicting short-term market movements can be very difficult, whereas recognizing the market will move in much broader cycles is more accurate. It’s what we learn by studying real estate market cycle history.

Let’s talk about where we are in today’s cycle. We are currently seven years past the bottom. The past seven years have been a sellers’ market with plummeting inventory, rising prices, nervous buyers often involved in multiple offers, and happy sellers more often than not getting the price they wanted.

But the client I referred to above was a potential buyer and he was very nervous. He tries to stay informed, reads news articles, watches TV reports, and concludes the market is teetering on the brink of a crash and is therefore afraid to buy. And he’s been thinking this for years! He wants to buy because his rent is skyrocketing, up 10 percent this year alone, but he’s confusing the short-term media screeds about this tremendous market with the long-term patterns of market cycles, thinking that the minute he buys a home the market is going to crash.

So let me be clear: no one can predict the real estate market with 100 percent accuracy. I can’t, the Federal Reserve can’t, the banks with all the money can’t (obviously!), no one can. But, understanding how market cycles work and recognizing how low our current inventory is, I can say with confidence I do not see any impending weakness in the market over the next couple of years. We are over 10 years into what will probably be a very long cycle of low inventory and rising prices.

I can’t tell you what the Dow Jones will finish at next Monday. I can’t tell you if the Rockies will win their fifth game of the season. I can’t tell you what the weather will be like on April 6. But I can say with confidence that real estate tends to move over predictable long-term trends, and this market cycle has a long way to go.

Recently, I wrote a guest blog post for All Denver Real Estate’s site discussing the current trends and opportunities in the Denver market.  Long story short, if you can find value add scenarios, in good locations, you’ll be successful as long as you’re working with experienced partners.

I’ve been helping investors in the Denver market reach their real estate investing goals for over 10 yrs now.  I’m also personally an active real estate investor and happy to share my experiences and thoughts on where the best opportunities are.  Shoot me a call or an email to set up a consultation, we can meet at my office in the heart of Denver’s Lower Highlands (LoHi).

Vacancy Rate: Ending Fourth Quarter, we saw a slight vacancy rise to 5.2% from 4.4% last quarter. Vacancy is always highest in this fourth quarter and usually lowest in the summer, so this remains consistent with previous years. We’re seeing two-bedroom, two-bathroom units at the highest vacancy rate (5.7%) and efficiencies and one-bedroom units at the lowest vacancy rate (4.9%).

Historically, larger apartment buildings have higher vacancy rates, and this was evident in the stats from this quarter: Buildings with 200-349 had a vacancy rate of 5.6% and buildings with 9-50 units had a vacancy rate of 3.4%.

This slight jump in vacancies could be a result of the 832 new apartment units that were reported for this quarter.

Average Rent: Typically we see average rent decline very slightly from third quarter to fourth quarter, and this year was no exception, but overall this trend is very favorable for landlords.

List Price: 405k

If you’re looking for cash flowing Denver Investment Properties for sale, this Denver 4-plex for sale is a great place to start.  All units are 2 bedrooms, 1 bath.  Each unit is currently on a month to month lease, I see that as a benefit to the new Buyer.  Lets take a look at how this Denver Income Property is currently performing:

AAI (Average Annual Income): $36,480

AAE (Average Annual Expenses): $10,575

AANI (Average Annual Net Income): $25,905

PAI (Projected Annual Income): $40,529

PAE (Projected Annual Expenses): $6,526

PANI (Projected Annual Net Income): $34,003

Based off the number above, the subject property is performing at a mid 6% Cap Rate.  There are a few ways owners/investors can increase Cap rates:

First, you could raise rents.  Our subject property currently has month to month leases in place. Denver vacancy rates are extremely low right now, rents are on the rise.  Raise rents immediately for increased cash flow/higher Cap rate.

Second, as the owner, implement utility bill backs to the tenants instead of paying their utilities for them.  This eliminates a good amount of your expenses and places those previous expenses into annual income, hence more cash flow/larger Cap rate.

Interest rates are still low, now is an amazing time to become apart of the Denver investment market and this is a great property to get started with!

Contact me, Brian MacMillan, for more info.

List Price: 235k

Sold Price: 220k ( I represented the Buyer/Investor)

This was a good deal for a past client/investor of mine.  The Englewood duplex for sale is an up/down duplex that will cash flow significantly.  The lot is also zoned R2 which will allow for possible development options in the future.  If you haven’t considered the Englewood area, now would be a good time to contact me to discuss not only Englewood rental options, but Englewood investment/development options.  The South Broadway area has really changed over the past few years and isn’t showing any signs of slowing down.

Here are a few photos of the Englewood duplex that just sold:

Lets break down some key factors and how they’ll affect the rest of this yr:

Interest Rates: Both owner and non-owner occupant rates are super low, almost free money.  Savvy investors are buying now because they’re cash flowing more due to these low rates.

Vacancy Rates: My clients tell me all the time they put an ad on Craigslist and have 20 responses in less than an hr.  Inventory can’t keep up with demand, which means bidding wars amongst renters.  I was speaking with another agent last week, he told me he just rented out a house to a business owner that gave him $1,000 to spend at her retail shop in Denver if he accepted her application.

Market Rents: Supply & Demand 101, extremely low vacancy rates means rents are soaring.

Appreciation: There is a huge pinch happening right now in Denver and the surrounding areas.  Homes/Condos available for purchase are extremely limited.  Denver’s population is the largest its ever been right now and our inventory is the lowest its ever been since the MLS has been in existence!!  Same is true for Denver Income Properties for sale due to low interest and vacancy rates, matched with soaring rents and appreciation.  My office, in the Lower Highlands/LoHi, appreciated 26% last yr!

Everyone’s situation is different.  Give me a call/email to discuss how to get started, or maybe take advantage of selling a current asset and utilize a 1031 exchange into a larger asset.  Denver Investment Properties are on fire right now, lets talk to see how you can take advantage of the factors mentioned above:

Brian MacMillan: Investment Specialist

720-938-4350