One of the best places to invest your money with the biggest return would be to put it into the real estate market. Denver especially is a great city to start investing in with its ever-growing market and continuing economic growth. With 5,000 people moving to the city monthly and new career opportunities presenting themselves daily, Denver continues to be one of the top markets for people to move to. If you are an investor this is something you look for when deciding where to invest your money, does this area look like it is going to be bringing in a return on my investment? For this blog, I have decided to write out some questions I have been asked by investors over the years, from new investors to seasoned investors, with my answers. My hopes is this will help some of you out there who have been thinking of becoming an investor be able to understand better why this Denver market is a great place to start and how I can help you find the best investments in the area.
Investor: Ok so I have been looking at becoming a real estate investor but I guess my question for you would be, what kind of investment would be a good place for me to start? I know I could go into crowd funding or I could flip and rent being the landlord or working with a property management group. If I am looking to be a more passive investor, not so hands on, where would you recommend me to start?
My Answer: My recommendation for first time investors, looking to be more passive, would be to start investing in condos or townhomes. A single unit is much easier to get started with as you are only having to address one tenant and one unit. I recommend condos and townhomes as most of the time you are only responsible for the interior of the property and not the exterior and grounds. This reduces your exposure to possible costly repairs such as, roofs, exterior siding or stucco and irrigation issues. My other recommendation would be to get help from a professional management company. A management company will have a good supply of contractors that can help out in the event of an emergency. They will also take that call at 2am in the morning for a leaking hot water heater or the furnace not working on a cold night.
Investor: Simple question, how much do you think someone should bring to the table to start with? I have started putting money aside to buy and flip homes but I do not know if there is a golden number I should be shooting for or not?
My Answer: This is a tough question. Depending on the property, the amount of work required to remodel/repair, the type of loan you will be acquiring will change my answer. Most investor loans will require 20 to 25% down to purchase the property. There are hard money loans that may give you the amount needed for the acquisition and rehab of the property. These loans usually require a 10% investment with the overall remodeled property appraising with at least 20% equity after completion. Hard money loans are great for fix and flips but can be costly if you cannot move the property fast.
Investor: I understand that investing in property isn’t like investing your money into other things such as mutual funds or stocks. In those cases you get to see an investment return more quickly while real estate it can take longer. Because the Denver market is such an active one, growing quickly with no sight of slowing down, do you think I have a better chance of seeing my investment returns more quickly? Or does it depend on what type of investment I am trying to accomplish?
My Answer: My honest opinion is Real Estate is the best investment. Stocks can give you a faster and greater return on your money but you can also lose everything. Real Estate will never be worth zero. The real estate market will go up and down but for the most part your, if you can wait out the down times, your investment is pretty safe.
Investor: Obviously there is always risk when going into any business transaction, even property investment. I want you to be upfront with me, what are the biggest risks you have seen when handling real estate investments?
My Answer: There are always risks when investing. Real Estate is no different. If you are fixing and flipping a property and you paid too much for the property or you had unexpected expenses on the property this could really affect your return on that investment when you go to sell. If you are holding the property as a rental property and you get renters that severely damage the property, this could wipe out your rental gains for that year. My recommendation is not to be afraid of investing but to make sure you have a great Realtor working with you that might be able to point out if you are paying too much for a property or might recognize possible large expenditures on a property that you might have not calculated in your rehab costs.
Whether you are a first time investor or a 20-year investor, I hope my answers have given you some good insight into the market here in Denver. I would love to get the opportunity to work with you as you start your investment journey or as you continue investing in the real estate market. Feel free to give me a call or shoot me an email and let’s make a time to chat about what investment opportunities are out there for you.