Creating Wealth “Investing in Denver Real Estate”

            Many realtors I speak with share their experience of the current Denver Real Estate market as pretty much one of “feast or famine”. While there are always the fortunate few who perform well in any market, many are experiencing the impact of the local recession economy. Seasoned veterans speak of the value and opportunity of “market cycles,” so then the challenge becomes anticipating the real estate curve and understanding how to teach buyers why now is a good time to become a real estate investor.

Local Market Reality:  Sales of previously-owned homes are down 1.6% as of June of this year compared to the first half of 2005. “Meanwhile, June inventory hit a record high of 31,900 homes, up from 30,457 homes in May.”  This increase in local inventory is a classic example of strong supply with relatively weak demand. On the bright side, the median sales price of a single family home in Metro Denver increased 6.3% in June to $335,111.

While it may seem buyers are hard to come by and a significant percentage of the ones that do appear seem to be credit challenged and non committal, I was encouraged by these statistics because they show an appreciating market. Also, Colorado is outpacing the 1.8% expected national average for job growth at 2.8% and is ranked 10^th in the nation for year-to-date employment growth. With rising interest rates making it more difficult for buyers to qualify for mortgages, the local rental market is becoming stronger every day. The glut of homes on the market also means investors can find value now and expect appreciation over time.  If you consider all of these factors, investing in local Denver real estate with a buy-and-hold strategy is a smart business decision.

Finding Investors:

1.                  Participate in local investment groups – CAREI, eRealEstate and IRR are a few of the local groups.  Ask around for others in the area. 

www.carei.com

www.irrofcolorado.com

www.erealestate.com

2.                  Sponsor or teach a seminar about real estate investing

3.                  Share the statistics here with your current market sphere – get them excited about investing in the
Denver market.

Finding the Money:  The challenge many investors face is where to find the cash to invest.  There are ways to access additional capital your buyers may not have considered:

1. An equity reposition:  your buyer may have untapped equity in his home that would be better used investing in more real estate.  Consider this example:  Your buyer owns a home worth $300,000 with a mortgage of $150,000.  When his home appreciates 5%, he earns $15,000.  Not bad, but he could be doing better:  Using a cashout refinance, he taps 80% of the home’s total value or an additional $90,000.  He uses this money to buy 3 investment properties at $150,000 per house with a 20% downpayment on each.  With good financing, including rents received combined with expenses and depreciation that help him increase his annual tax savings, he can hold onto these rental properties indefinitely with little or no negative cashflow.  When the market appreciates 5%, he makes $7,500 in appreciation on each rental property and increases his wealth by $22,500 in one year!
2. Self Directed IRAs:  The Dow Jones Industrial average is up less than 1% for the year, and returns on other traditional investment vehicles such as annuities are averaging about 6% – barely keeping up with inflation.  What better way to accelerate wealth than to take control of orphaned 401ks and IRAs and roll them into Self Directed plans where you can invest in real estate and other higher yield investments? Having more control over your retirement funds can grow your wealth faster.  Self Directed IRAs and other retirement plans have been around since the 1980s and are gaining attention in the market today as a viable way to invest in real estate. 

Given the current state of the market, it is important to develop alternative marketing strategies and be a resource for your customers by helping them grow their wealth.  Hopefully this article has provided you with some helpful information so you can take advantage of the growing real estate investing market in
Colorado.  For additional information, feel free to contact me at 303-877-6323 or visit the websites I have provided. 

**Statistics quoted are from the following sources:

http://www.denverchamber.org/ecdev/index.asp

http://www.metrodenver.org/

http://www.metrodenver.org/DataCenter/RealEstate/RealEstate.icm

http://www.metrodenver.org/DataCenter/DenverEconomy/MonthlyEconSummary.icm

http://www.bloomberg.com/markets/stocks/movers_index_dow.html