fbpx

The Insanity of It All

Barney Fiife

Lost Purchase Bid by $500,000!

We had a client put in an offer on a $1.7M home yesterday, he lost it to a buyer who came in $500,000 over with cash.  Another client closed yesterday on a condo that had been on the market for a year.  And a different client went under contract at list on a $200,000 2 bedroom 2 bath condo in Aurora.  This market is not a straight line.  Close to List for September was 101.9% yet, $500,000 on a $1.7M home is a whopping 30% over asking!  So, why would ANYONE think it’s a good time to buy?

Investors Still LOVE this Market

Investors purchased 67,943 houses during the second quarter of 2021, the highest quarterly number on record.  That equates to one out of every six homes purchased during the quarter was sold to an investor.  If you joined us for our monthly Building an Investment Empire, we went deeper into these numbers and dove into opportunities that exist EVEN in this market.

Of the 67,943 homes sold to investors in 2Q21, 2,117 of them were sold in Denver, or 13.4% of the inventory sold.  Would it surprise you if I told you that’s up 108.8% over last year?  But the Denver real estate values are up 19.5% per CoreLogic.  So how can investors make money in this market? They are attracted by rising home prices and high demand in the rental market, which means they can easily find tenants and anticipate eventually selling for a profit.  So even paying more.. they are still anticipating greater returns, especially while rates are low.  Multi-units are the most favored with 26.5% purchased by investors.  You know what I get when I read this??  While 26.5% of multi-units were purchased by investors, 73.5% of them were purchased by owners.  HA!  That’s my jam.  Helping VA purchase four units with $0 down or FHA with 3.5% down or Conventional at 15% down for a duplex, 20% down three or four unit.  With the appreciation we are seeing.. go FHA for 2 years, refinance into a conventional loan then move to the next primary.  People who are willing to move can scoop up four, eight, twelve doors securing not only their financial future but changing the trajectory for generations to come.  How can we help our clients find income opportunities in today’s rising price market?  Get creative!

My daughter is finally under contract.  It’s a 5 bedroom single family near DU.  It needs work… but 5 bedrooms near DU is a multiunit 😉  … think house hack and room rentals.  Jenny Usaj shared a house she was looking at .. 8 bedrooms, downstairs separate ADU, 2 bedroom ADU above the garage.  After I stopped laughing about how many beds were in this house (each room had 2 twin beds), my eyes lit up!!  Investment opportunities today are not as cut and dry as they used to be.  This house gives you the opportunity to have 3 rentable spaces and with eight bedrooms, what about in home senior living care?  You could live in the garage apartment, buy it with 5% down (YES, I have 5% down Jumbo loans), and rent out the rest.  I know several investors combing the market for homes with eight bedrooms.  Think outside the box.. not just one unit one rental.. there are rentable rooms, basements, garages, parking spaces, ADUs.  With all the limitations on short term rentals, how about renting by the month… connect with insurance agents on providing rentals when someone’s house floods, burns down, or is getting remodeled.  How about all of those traveling nurses making bank right now.  They need places to stay for a few months.  Look near hospitals, schools, airports. This is not the market to give up in.  This is the market to dive into head first.  Why?  Because it will keep going up.

Did you see the MBA forecast in my rant last week?  Existing home sales are expected to go up 6.8% in 2022 over 2021; new home sales up 23% .. thought you were busy this year?  New builds up 23%… WOW!  All this while rates go up to 4%.  The math still works.

Yes, The Math Still Works

Appreciation – Principle Reduction – Cash Flow.. that’s why the math works.  New homeowners in 2019 and 2020 made 20% gains this past year, not on their money… their 3, 5 or 20% down, but on the entire value of the home.  That’s not sustainable and

it’s not healthy, but it is remarkable.  Going forward we can only hope that appreciation resumes at it’s historic averages.  For the U.S. that’s 3.9%.  For Denver, it’s 6%.

Think about this… if you bought a Denver median priced home in January 2021 for $530,000 with a 3% interest rate putting 10% down, here’s what your numbers could look like.  Granted nothing in life is guaranteed.. but you need a roof over your head, and you want to invest.  Using 20% appreciation the first year (crazy I know), 10% for 2022, 6% 2023 and 2024, then 4% for 2025.. as the bulk of the 29-32 year olds work their way through their top buying years… the opportunity to build your personal wealth and the wealth of your clients is tremendous.  In fact, that $530,000 asset purchase for 10% down or $53,000 could give you a gain of $340,429 in value between the “blue” appreciation values and the “green” annual principle reduction.  Add room rent, ADU rent, garage rent… the number just goes up.

Just sayin’

Be The Expert

  • The Millennial impact has just begun
  • Age 33 is the peak first time homebuyer year
  • Unsustainable appreciation will slow as inventory rises
  • Demand will only increase as forecasted
  • More buyers will come back as the market stabilizes
  • Sellers will want to lock in equity

Bottom line.. Opportunities Exist!  This is a wonderful market to be in!

 

Nicole Rueth has been passionately advising clients on their wealth building and home financing strategies for over 17 years. Her path has been non-conventional and it is a benefit to her clients.  www.TheRuethTeam.Com.
EnglishSpanish