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Real Estate investing in Colorado?

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tigerbalm

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Hello! Over the past year I've been trying to implement some of the strategies I've encountered in TMF and Unscripted. I'm currently working on a business that I'm pretty happy with, whilst working my decent paying job as a software developer. I'm approaching the point where I'd like to start investing in real estate but I find myself in the unfortunate circumstances of being amidst a brutal Colorado market, where multi family homes are simply outside of my price range (<$500k). I'm curious if anybody has advice on investing in an expensive market.

For reference, I have about 60k to invest, awesome credit, no debt, and make about $100k. I'm not necessarily looking to FHA and live in the place, although that is an option if I find that it's beneficial (which would likely only be the case in multifamily homes).

1. Single family homes seem impossible to generate positive cash flow if you FHA, even with renting out the rooms you don't live in.
2. I've read that single family homes are hard to get positive cashflow even with a conventional loan
3. Multifamily homes are crazy expensive (probably $600k for a duplex) and seem tough to get positive cashflow unless you find a cheap 4plex (would have to be with FHA for me).

Given the above criteria, it seems like investing the money I have elsewhere might be preferable - (I've invested in my business, and don't think that more capital into it will necessarily be beneficial at this point) but I'd be curious to hear thoughts on if I'm approaching this in the wrong manner. Perhaps investing out of state is an option? Anyone else running into similar issues? Thanks in advance for any insight.
 

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Envision

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Hmm,

If you dont want to go out of state you have two options
1. Buy a duplex FHA and rent out the other side (sounds like something you'd rather not do)
2. Save more for a down payment on a larger multi family deal or look for partners to proceed.

-----

If you want to go out of state, just make sure you do your research, understand the market, and are solid on your numbers before proceeding. Also management companies are key out of state.
 
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tigerbalm

tigerbalm

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Colorado
Hmm,

If you dont want to go out of state you have two options
1. Buy a duplex FHA and rent out the other side (sounds like something you'd rather not do)
2. Save more for a down payment on a larger multi family deal or look for partners to proceed.

-----

If you want to go out of state, just make sure you do your research, understand the market, and are solid on your numbers before proceeding. Also management companies are key out of state.
Thank you for the response! I'm definitely not opposed to the duplex FHA - I think this would be ideal if it could generate positive cash flow. Problem is, that for a, say 500k duplex with FHA, I believe that you're looking at around $2000 / month mortgage including insurance (just based upon some calculators I've used). Living in one side, your cash flow would be negative assuming you could rent the other side out for $1200. Despite this, I do see the value for living cheaper whilst building equity
 

Envision

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Yeah it's not ideal, depending on how much you put down you'd be looking at roughly $3500 for a 500k mortgage with an FHA loan (gotta factor in PMI).

What ive done (in some of my deals) is purchase knowing that im going to be spending a little over break even and with my market appreciating so quickly, I refinance into a conventional loan and drop the PMI. You might not have that opportunity so you'd have to be okay with being slightly negative.

I like it because it's a great way to get your bearings around real estate and landlording without a massive amount of risk. Since you live in the duplex you have more laws in your favor and its relatively lower risk.
 

SteveO

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Not a lot of cashflow in most of the popular locations right now. I pulled out of the apartment market a couple years ago. Seems like I was early as prices have continued to grow. But, I am waiting for a softening in the market before going back in.
 

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