Denver Real Estate Investing 101 - A Quick Guide

Like all Denver Real Estate investors, you may be wondering "what type of real estate" should I invest in to jumpstart my real estate career.

First, if you are planning to invest in any type of Denver real estate, short or long-term, make certain that you have created and finalized a business plan and strategy. Now the business plan doesn't need to be a Fortune 500 level plan, but it does need to be in place.

After you have all your preliminary plans in place, then it's time to take a hard look at all the types of investments that exist for any willing and qualified real estate investor in Denver.

The first investment property that seems to appeal to many investors in Denver is a fix-n-flip. The initial excitement and interest comes from stories of big money made in fixing and flipping Denver real estate. For an investor just starting out doing a small fix-n-flip can be a good way to get your feet wet and put some extra cash into your pocket for doing more investing. That being said, the first thing to know about Denver's flip properties is that they require a lot of attention. Attention to small and large details. Typically, these types of properties are found in existing and well-established neighborhoods throughout Denver.

The reason for flipping properties in more mature Denver neighborhoods is that the history of sales in any particular neighborhood will in many ways determine your level of success. Fix-n-flip properties require the following criteria to make the investment experience a positive one.

First, purchase the property for well less than what other properties are selling for in total area. Buying below retail helps you to see the actual margin you may have for fix-ups and resale. Be sure to ask me to explain the age of the data and it's source to you.

Second criteria is what is the current appreciation rates in this Denver neighborhood. For example, if the home is in the area that is appreciating 1 - 2% per month and the location is extremely hot with people who "gotta live there," then you will have to add those percentages on to your anticipating resale of the property.

Last, I will analyze the recent SOLD comparables is also important to your projects overall success. Having a handle on the low, mid and high SOLD sales will help you to see where your property will realistically sell.

Knowing the number of days on the market for any given property will also help you build a strong business and financial plan. Days on market varies wildly between Denver neighborhoods and price points, so let me help you choose one that will sell fast. This data is often critical when you are borrowing money from a bank or mortgage company or when you are considering a private financial partner and need to build a strong business case to support this financial involvement.

Remodeling costs can make you or break you. First of all, evaluate all the areas that must be repaired or updated before ever selling the property. This is one area in particular, when people can lose their shirts from overdoing the fix-ups to running out of money and cutting corners to complete the project. All of these reasons can create a formula for disaster if you aren't careful. There are some great
contractors and companies to work with here in Denver, including great sources for materials and your homework and planning will really pay off.

The one area that new investors underestimate is the cost of lining out vs. doing the fix-up work themselves. While investors with construction trade experience have a leg up on the competition, many new investors are equally talented in other aspects of fixing and flipping properties. The bottom line is you must keep your own limitations before jumping into a fix-up project.

Last, but not least, you must determine your finance and resell costs. The cost of financing your project will impact the final outcome of your project. For example, you may get a great interest rate on your loan but it could cost you 1 - 2% extra points if the property is sold in less than 12 months. Or your loan rate may double if you aren't out of the project within 6 months. Basically, there are thousands of loan programs as there are investors, so before signing on the bottom line, make certain you understand the terms.

The last item to consider for your project is the costs of reselling the property. From realtor commissions to title insurance the fees are typically unavoidable. Go over every line of the net sheet I prepare for you and be aware of the cost of doing this business. To speak about your real estate investing goals; you can email your request to Marie@LocationInDenver.com or call me at (720) 275-3926.

Happy Investing! Marie