For today’s live Drinks and Deep Dives show, Preston joined me to talk about changing real estate trends in Denver. We’re updating our ADU series and need input; discussed how the recent showing data reflects the market; did a deep dive into a duplex purchased by an out of state client; and answered some frequently asked questions.
- Listen to the podcast “#294: DDD: Changing Real Estate Trends in Denver” on the Denver Real Estate Investing Podcast
- Watch the YouTube video (at the bottom).
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
A couple of years ago, we did a series on Accessory Dwelling Units (ADU) in Denver. So much has changed since then that it’s time to update the series. To make sure we have the most relevant and accurate information, we’re asking our listeners to fill out this two question ADU survey. The first question is what information you’d like to know about ADUs, and the second is if you’re involved in the ADU space and would like to contribute. If you have any specific questions you’d like answered or have any firsthand experience with ADUs, reach out to us.
Showing Trends Reflect the Changing Market
We recently got new data on showing trends that illustrate how the Denver market is changing. In 2021, we’ve seen very high numbers of showings per property, or how many people come out to look at a property that’s for sale.
Compared to the past few years, we’ve had an almost 50% increase in some instances of showings, from 10-14 to the 20s. But if you look at each month in 2021, you see a drop off in showings over the course of the year. The market is still competitive with a lot of active buyers, but as people start going out into the world and doing things, there is a slowdown in showing traffic.
We’re seeing this trend play out in the offers being put on properties. Good properties that are well priced and in nice areas are still getting 15, 20, or even 30 offers, but we aren’t getting the crazy offers thrown out there like we were last year. People aren’t as desperate to get under contract, so the offers they’re putting in are more serious. As a result, clients are sometimes able to get properties at, or even below, asking price. Even still, we recently had a client put his single family home in Arvada on the market, and because it was priced right and in a good location, there were 65 showings in 2.5 days and they received 20 offers on the property. Good properties continue to be highly competitive, but the market is slowly changing.
Deep Dive into a Duplex
Our deep dive this week was a deal analysis of a duplex an out-of-state client purchased in Arvada. The client works in finance on Wall Street and wants to diversify into real estate. He came to us with a plan to achieve his long term goals, and we helped him find the right property to get started. Now, he’s on track to ride the wave of appreciation and build his portfolio. To read about it in more detail, check out this Focusing on Real Estate Appreciation in an Arvada Duplex blog post.
FAQs and Wrap Up
Preston and I answered some frequently asked questions:
What’s going on with cap rates?
Everyone uses cap rate as a base metric and we’ve seen them compressed lately. It’s important to keep in mind that with the interest rates so low, the spread is still there, but you’re going to have less cash flow. Remember that for the typical 30 year fixed rate financing, your biggest expense on a property is going to be your mortgage. If you look at a long term analysis, your cash flow will increase significantly over that time.
What’s happening with interest rates?
We’ve noticed interest rates have dipped a little in the past couple of weeks. The government is saying they won’t be going up in the near future, so we expect them to hold steady. For investment properties, we’re seeing mid-3 to low-4 rates and owner occupied properties are often still in the sub-3’s. These are really good rates for the long run and are below cap rates. We don’t expect a huge change through the end of this year, but 2022 may be a different story.
Is now a good time to buy real estate?
This is a loaded question because the answer is always “It depends.” It depends on a person’s goals, their long term plans, and where they are in their real estate career. Personally, I’m under contract for a property right now; while it’s not a home run, I locked in cheap financing and it fits my goals of acquiring more properties. I plan on holding this property for 5-7 years, doing a refinance, and repositioning it then. When we talk to other investors, they always tell us they wish they’d started sooner. As long as you have high cash reserves and a long term plan, it’s hard to lose money in real estate.
Send us your Denver real estate questions
If you have any questions you’d like answered or have a topic you’d like us to do a deep dive into, reach out to us. Join us live every Wednesday at noon for Drinks and Deep Dives with Chris Lopez or tune into the podcast version the following week.