Investment Properties

An unusual blend of real estate factors make the residential investment property market across Boulder Valley an attractive brew for investors of all kinds. Demand currently outstrips supply and prices could be moving from a stable simmer to an increasing boil in markets from Boulder County’s eastern outskirts to the heart of the city.

Record low investor interest rates, lots of renters and a stabilizing housing market all contribute to the high demand for investment properties.

“Rates are so low you can get a three bedroom condo or house on a 15-year note and still cover the mortgage,” said Janet Leap, Re/Max of Boulder broker. This appeals to investors looking to purchase now and focus on long-term growth with steady appreciation and a good passive income down the road. Such investors often target single-family dwellings, with homes in the $300,000s and neighborhoods such as Martin Acres in Boulder seeming a pretty safe bet, she said.

For those interested in generating cash flow now rather than slow appreciation, investors hunt for properties attracting students. The typical per-bedroom rental rate in areas attractive to students is several hundred dollars per-month higher than a more family-friendly unit, translating to quicker cash flow. The University Hill area and downtown Boulder both cater to students who want to walk to school but also stay close to the active night scene on the Pearl Street Mall. The problem is finding inventory, Leap said, with available properties on The Hill being hard to find for the past several years.

Sales for houses, condos and townhomes in the first quarter of 2013 were up across most of Boulder County, according to Boulder Area Realtor Association statistics, with some areas seeing sales percentages increase by double digits. Longmont single- and multi-unit sales increased more than 30 percent for the first quarter of this year.

“I would say investors are snatching up what they can find anywhere the rents are exceeding the mortgages,” said Danna Hinz, an international real estate specialist with Re/Max Alliance and a certified distressed property expert. “Longmont is a good game for investment properties because there is more for sale there, more options.”

Hinz works primarily with investors and first-time home owners, often focusing on eastern Boulder County and the surrounding areas. She’s seen investors pool money for cash purchases and buy investment properties straight out of the foreclosure auction — sometimes outbidding banks — and thus grabbing the properties before they hit the open market. She’s had some investors buy properties they haven’t even seen to take advantage of the opportunity.

Despite so many investors buying properties, there’s still a dearth of places available to rent in some areas, Hinz said. It’s an aftertaste from the recent glut of foreclosures, with many foreclosed-on owners needing to rent now because of credit problems in recent years.

Properties that do make it to market often have quick or multiple offers, too, Leap said, and prices are on the rise. She recently sold an investment property that had been on and off the market for several years. When she and her client recently relisted it at 4 percent more than its previous list price, the unit sold within a week. BARA data backs this up, with some regions seeing 15 percent price increases and most areas seeing some increase.

That’s perhaps the most important thing for investors interested in the Boulder market to know, said Steven Carter of Re/Max of Boulder.

“Prices are increasing so the values that were out there for the last four or five years are disappearing,” Carter said. Still, investor interest is on the uptick. He’s seen conventional financing for investment condos hamper some would-be investors, but others are still a big part of the market. New financing opportunities are starting to pop up, too, such as an increasing trend of retirement-fund money used toward investment property purchases rather than stock market purchases.

“I think people are viewing Boulder real estate as less of a risk that the stock market,” Carter said. Boulder’s reputation as a solid rental market, its attractive lifestyle and landscape functioning as a people magnet, plus a housing market that held value during the Great Recession, create a tempting blend for investors.

Current real estate market conditions and a range of financing options can open doors to a broader palette of investors, too, Hinz said. She wants to get the word out that even the average homeowner has a shot at investment-property purchases, provided they do their homework.

“You need a good agent, a good lender and to build a strong working relationship,” she said. “Then there’s a good chance that anybody can buy a small rental.”

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