By: Skyler Moore
The Denver real estate market has started to slowly show signs of life compared to extreme bubble markets such as Phoenix, Las Vegas or Florida. Price to rent ratios and price per square foot on distressed properties are starting to make sense and cash on cash returns are often in the low double digits. Knowing how to conduct the proper due diligence on a property is an important part of real estate investing, as is finding the best area where income property is for sale.
There are several areas of Denver that offer strong returns and potential growth to real estate investors that are willing to buy and hold. Different areas in Denver offer different strategies to investors. The Highlands area for example, is a swanky popular area among young professionals. This area was not affected much by the housing downturn and in fact, some properties experienced appreciation during the housing crisis. This is due to a limited supply with great views of downtown and easy access to the amenities of city living.
Other areas have been hit hard by the housing down turn that now offer strong returns for real estate investors due to the price per square foot and price to rent ratios. A popular planned urban development outside of Denver Metro is Green Valley Ranch. This area was originally developed by Oakwood Homes, which sold plats of land to National builders such as KB Homes and Lennar.
Every week a handful of these single family homes are up for auction and the Denver Public Trustee sale. I have seen town homes and condos sell for as little as $40,000 in Green Valley Ranch that were built in 2005 with 2 bedrooms and 2 baths. Market rent for a unit like this is around $700 a month. With cheap taxes and insurance in Denver county, these type of investments offer a strong and substantial net cash flow for investors. A typical 3 bedroom 2 bath single family home with 1,200 square feet may sell for $130,000 that sold for $180,000 or more only a few years prior.
The difference between these markets is the future value of homes. In the Highlands area of Denver, a limited supply is available. A popular trend in the Highlands and surrounding neighborhoods is buying older properties, tearing them down to build new and modern homes. Often developers will purchase several older homes in a row on contract to build fancy town home plots that even in today’s real estate market draw significant interest.
The Green Valley Ranch area offers affordable living, big box retailers and close vicinity to jobs, which are great features. The negative factor however, is the abundance in land. The purchase of Denver investment property here does offer cash flow and double digit returns for investors, but future value in my opinion will not be near what is seen in an area like the Highlands. Thousands of plots for single family homes are available to be built, while the supply is simply not available in areas close to downtown Denver.
Depending on the strategy of the real estate investor, different areas of Denver have various features to offer. Every deal is different in real estate and locating the perfect location for investment property in Denver is no exception to the rule.