Denver Income Property Q2 | 1H 2011 Real Estate Statistics

NOW is a great time to be a real estate investor in Denver.  If you’ve been buying rental property during this opportunistic period unmatched since the 1980’s, you are now enjoying the following:

• Zero effective vacancy rates (actual is less than 2%);
• Record high rents and rent increases;
• Low interest rates for investment property refinance; and
• Excellent yields on invested capital

Many of our turn key rental property clients have refinanced into 15 year mortgages that still provide positive cash flow, and are also paying down principal and packing away equity at a fantastic pace.

But is it time to shift strategies?

For the past two years, the Private Market Group’s turnkey investment property acquisitions have mostly been residential single family homes in good rental areas like Fitzsimons Hospital expansion area, north Aurora, northwest Denver, and certain areas of central Denver. But changes are taking place in these markets and single family houses are becoming more expensive to purchase as the distressed housing inventory gets scooped up by investors, and now owner occupants. Lower supply naturally leads to higher prices.

But the income property category, defined as two units or more, is starting to show promise statistically and financially in the Denver market. As you will see below, the buying opportunities for residential duplexes, triplexes, and four unit buildings looks to be good during the second half of 2011 and perhaps into 2012. The discounts are growing and the market appears to be hitting bottom for this segment.

Following are the key indicators for the Denver real estate market for investment properties; the most important statistics for income property that are tracked by Private Market Group at Your Castle Real Estate:

• Average price per unit
• Number Sold
• DOM (Days on Market)
• Discounts
• MOI (Months of Inventory)

Real estate investors should consider these important indicators now as they plan for investments the rest of this year and through the winter buying months. It is possible that two to four unit properties will be as good or better investments than single family houses during this period until the shadow inventory starts to become available (we will discuss shadow inventory in another article, please subscribe to our news feed so you don’t miss this important information).

Following is a report of the first half of 2011 compared with the first half of 2010. NOTE: These stats are for 2 units and up.

Denver Real Estate Statistics

Second quarter (2Q)  First half (1H) 2011 vs. 2Q and 1H 2010

• The Denver market average price per unit is down 2%; from $80k to $78k.
• The number of income properties sold is up 13%. This follows an extensive trend of declining sales volume; market activity has stabilized in 2010 and 1H 2011.
• Number of days on market is up 36%. Increasing DOM is usually a leading indicator of inventory builds, which then leads to price decreases.
• Sellers are offering larger discounts from the last half of 2010. Discounts are between 4.1% and 5.6%.
• Months of inventory is down, declining from 12.7 months in 2010 to 9.6 months in 2011 (remember this statistic is for income property, 2 units and up only, not single family homes). Because many investors now suspect the bottom is here or near, inventory has been declining for 18 months. This should lead to new appreciation and smaller discounts by sellers in the near future.

Is it too late for single family home purchases? No, there are still buying opportunities for good houses to hold for cash flow. But the income property market may be where the best deals are for the balance of this year in the Denver market. Many investors have already jumped and sales volume of income properties is up 13%.

Another factor to consider for buy and hold investors is the “shadow inventory” of bank owned properties.  It is possible to depress price levels further if REOs and other distressed property hit the market. Watch for our special report on Shadow Inventory for subscribers coming soon.

About the Author:  Paul Barrow is a Private Real Estate Investment and Business Opportunities Broker in Denver, CO. He works exclusively by invitation and referral with highly qualified investment clients seeking cash flow and capital gains in the Denver real estate and business opportunities.  Contact Paul to learn more about the current turn key rental property portfolios and other income property opportunities using the Contact Us page or by calling 303-800-iBUY.

Here are the slides:

Q2 2011 Denver Income Property Trends Slides