Where there’s a need, you fill it. That’s how business works, most of the time. Denver’s vacancy rates are hitting record lows, according to the Division of Real Estate.
The need in Denver real estate is to help once-prospective homebuyers to find a place to live until they can get their assets and credit scores back to levels that banks used to require. The problem is, Denver vacancy rates are half the unemployment rate. Think about that for a second.
So, how do you, real estate investor/buyer, fill that need? Cash flow a property. Of course, it’s like the old Steve Martin joke: how do you cash flow a property? First, you get a lot of cash. That’s true in a sense that cash is pretty much king. But it’s not as if 20% is chopped liver. It’s kind of the way it used to be. Denver condos are good values because of the return on a relatively inexpensive purchase. Inclusive of a monthly HOA fee, investors are finding buyers lining up to rent a place before it’s even move-in ready.
Recent clients of mine bought a house in Washington Park, complete with a converted garage-into-carriage-house in the back. Two hours after the ad to rent the carriage house hit Craigs List, they had five applicants, one offering 6 months up front. These clients had a two-fold positive impact on the real estate market; they purchased a home from an investor that rescued it out of foreclosure, and then proceeded to house a needy tenant.
Here’s a case study that doesn’t have to end in tragedy. Six months ago, the condo below (video below can also be found on You Tube) may have sold with no incident. As it happens, six months in banking terms is practically biblical (and in the fifth month, your loan app was rejected). Normally, when you combine a motivated seller, a perfectly priced condo, one well-intended buyer with good credit, 10% down, and 50+% owner occupancy rates, and put it in the underwriting oven for 3 weeks, you end up with a completed sale. Not so. First, the appraiser miscalculated the retail v. residential ratios, causing the HOA to submit a questionnaire on the property, even after clearing up the ratio mistake. Despite the correction, the bank’s mortgage insurance company refused to rubber-stamp the bank’s supposed approval of the loan, stating that the one other condo for sale in the building couldn’t count as owner-occupied, thrusting the owner-occupancy levels below the acceptable amount.
Caution: shameless plug startsssss…. now. Currently, Baker Commons is a completely warrantable condo building. It’s 10 years old, with great reserves, a capable management company and one of the best locations in Denver. Shockingly, the only hurdle is that you need 20% down and good credit to buy in it. Too much to ask, right? But even at $200,000, unit #414is a steal for a first-time homebuyer, real estate investor, or part-time city dweller looking for a crash pad in one of the hippest parts of town!
Shameless plug brought to you by Karl Lueders. This condo is currently not on the market, but is accessible by calling Lueders at 720-971-8267. Or you can visit his search site to find properties just like it.