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Q4 2021 Question: Is Now a Good Time to Invest in Real Estate Now?

Case in Point : We’re receiving many questions from clients who have saved up money during the pandemic and are asking whether it’s a good idea to invest in real estate now, especially given the Denver metro market’s appreciation over the past couple years and current record prices. Some wonder if we’re in a real estate “bubble.”

Q: Is it smart to invest in real estate now? How can I invest?

A: Broadly speaking, interest rates for investors are very low (3.75% as of today), which makes it easier to “cash flow,” meaning rent revenue exceeds expenses (incl. mortgage, insurance, taxes, property mgmt, vacancy, and reserves). When you compare a 3.75% investment loan with current inflation of 6.5%, you realize you can effectively borrow money at 2.25% less than inflation. That's a pretty incredible opportunity.

On a local level, the Denver market is attractive because rents have increased 18% over the past year and are expected to continue increasing. Occupancy is currently below 5.0% and tenant delinquency is even lower, reducing operating costs. Further, many smart investors are opting to invest in real estate, rather than the stock market, which is near a record high. Investing in Denver metro real estate has outperformed the stock market for years and current cash on cash returns in Denver real estate are 15%-20%, which is 4%-9% higher than the stock market’s long-term average of 11%,

Given current interest rates, rent and vacancy rates, real estate prices, and alternative investment vehicles, we expect the Denver market to be a good investment for the foreseeable future. Further, as stated in our quarterly newsletter, we expect real estate prices to increase 8%-10%+ over the next year, so it’s smart to invest sooner than later.

Who fits the profile of a Denver metro real estate investor? It depends on what type of investor you want to be. There are 3 ways you can invest in Denver real estate:

(1) buy and rent out on a long-term lease

(2) buy a home with a mother-in-law suite (preferably with its own separate entrance) and live on the main level while renting out the basement

(3) buy a second home in Summit, Grand, or Park County where you can enjoy mountain vacations while also renting short-term through Airbnb or an outside management firm like Evolve or Vacasa

To learn more about capital requirements, specifics about investment returns, and which geographic areas we recommend most for investment; please contact us.We have investor-friendly lenders, property managers, tax advisors, contractors, and other professionals we are happy to introduce you to.

Contact us anytime you have a real estate-related decision or question – quitclaim deed transfers, renovation ideas, investment property questions, etc.

We’re more than just Realtors, we’re real estate advisors.


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