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8-10% capitalization ROR unleveraged on manged rental units in Denver

Wednesday, September 8th, 2010

8-10% cap rate deals on investor rental properties in Denver metro area

With 2010 Colorado housing foreclosure numbers running ahead of 2009 and likely to increase (RealtyTrac foreclosure forecast).  Many current homeowners will be forced into rental housing for quite a few years to come.  The Denver metro area market still has positive net in migration and
household growth (Population growth forecast).  Although this means that single family residential housing is unlikely to appreciate significantly any time soon, these same statistics and trends bode very well for the rental property market.

There are also some macro economic trends that we believe make certain rental properties very attractive from an investment perspective.

  • Less governmental support for home ownership – less mortgage market support, stringent loan underwriting, higher FHA insurance premiums will all contribute to a lower rate of home ownership in the U.S.
  • Mobile population – Our population is becoming increasingly mobile.
  • Public perception that home ownership is not a guaranteed investment.
  • If you believe that at some time in the future, inflation will  return, then rental rates can be quickly raised to keep pace with inflation.
  • There are a great many risks to the macro economy right now. - Five Economic doomsday scenarios for the US economy

As more and more households become renters (whether by choice or not), the residential rental market will outperform most investment asset classes.  However, most investors will fail to capture this return for a number of reasons:

  • Most investors are NOT suited to be landlords.
  • Rental properties need to be purchased carefully – not only for the ‘right’ price, but in the right price points, neighborhoods, with an eye on taxes, HOA dues, etc.
  • Most potential landlords cannot deal with a large number of tenants.
  • Most investors mis judge which properties will provide the best rates of return. – They probably are NOT the glamorous properties, but this is about making money, not show homes!

We have analyzed the rental market in the Denver metro area and identified the segments that offer the most attractive returns with the least risk.  We have provided an example below using our affiliated property management division at Surety Realty Inc.

Property Price  $ 54,950.00
Monthly Rent  $  800.00
Gross annual rent  $  9,600.00
Taxes – Annual  $  564.00
HOA – monthly  $  239.00
HOA – annual  $  2,868.00
adjusted gross income  $  6,168.00
Leasing commission – one months
rent
 $  800.00
annual mgmt fee – 5% of rent 5%  $  480.00
Net Annual income  $  4,888.00
Capitalization rate 8.9%

30 years later…nothing has changed

In the early ’80′s, when the Savings and Loan debacle was occurring, mortgage rates we’re between 12-14%!  At that time there was a rule of thumb that used a 6x gross rent multiplier for
evaluating whether a potential rental property offered a suitable rate of return on investment.  By looking at the example above, you can see the same rule applies today ($9,600 x 6 = $57,600).  However, today’s interest rate environment is extremely different than it was in the early 1980′s.  Mortgage rates today are hovering around 4.25%! 

The ‘real’ rate of return is TWICE what it as

This makes the ‘old’ yardstick of a six times gross rent multiplier relevant, but in need of evaluation.  IF a 10% cap rate was attractive in a 12-14% mortgage rate environment, then a 10% cap rate in a 4.25% mortgage rate environment should be at least TWICE AS ATTRACTIVE!

If you are interested in making a safe, secure, un-leveraged, investment return of 8-10% on your capital with a built in inflation hedge as well, then contact us today and we will discuss your situation with you.

Help for Underwater Homeowners?

Monday, August 16th, 2010

Early Christmas Present for Underwater Homeowners from the White House?

It seems that homeowners may soon get a break from the Obama administration.  According to an article on Reuters, the “Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater homeowners with negative equity of some $800 billion.”

Main Street treated like Wall Street

Wow – that’s pretty nice of the administration.  I mean, it’s about time that Main Street got the same treatment as Wall Street.  What does this mean?  Well, for one, homeowners could breathe a sigh of relief if their underwater debts were somehow forgiven.  Areas in the Denver metro area and many other big cities have been plagued by the housing crisis.  For example, Thornton Colorado Short Sales are prevalent and this could help solve some of the worries homeowners are facing.  Imagine the stress that you would no longer have if your mortgage debt was forgiven.  I don’t know about you but I would be the happiest person ever.  It would mean that my government actually cared about me and not just the major banks on Wall
St.  

You can always try a Short Sale

However, people must be prepared that this doesn’t pass and their debt won’t be relieved.  If that’s the case, here in Colorado, Colorado short sale brokers will be working that much harder to
sell their clients home.  I’m curious to see what happens on August 17th –
the day the Treasury Department meets about the future of Freddie Mac and Fannie Mae.  Stay tuned for more.

Short Sale vs Foreclosure

Thursday, August 12th, 2010

Short Sale vs Foreclosure

Many homeowners these days are ‘upside down’ (owing more on their home than it is worth) on their home and have recently lost a job, had a medical emergency, or other unexpected life occurrence that forces them to consider letting their home go to foreclosure.  While the number of foreclosures nationwide is rising again after the brief moratorium imposed by the administration, a short sale may be a better way to proceed for many homeowners.

Benefits of a Short Sale

  • You are able to select your own short sale real estate broker.
  • You can be current on your mortgage payments and still do a short sale.
  • You will probably be able to buy another home again sooner after a short sale vs a foreclosure.
  • You can avoid the social embarrassment of a foreclosure.
  • The effect on your credit score will probably be less from a short sale than a foreclosure.
  • Some banks do not report short sales to the credit bureaus at all.

Drawbacks of Foreclosure

The result of a foreclosure is the bank repossessing your house. Not only will you lose your house, but the lender can get a judgment against you for the difference you owe plus the lenders costs for the foreclosure action. If that isn’t enough, your credit report will be in terrible condition for many years to come. With certain restrictions, you may be eligible to buy another home in 5 years if the home was your primary residence. Without restrictions, the wait is 7 years. If you are an investor and do not occupy the home, the wait to buy with a Fannie Mae insured loan is 7 years.  A number of sources have reported FICO score drops from 200 to 400 points after a foreclosure.

How long does a Short Sale take to accomplish?

Short Sale negotiations with a bank can easily take 2-3 months.  Many banks still have not caught up with the wave of foreclosures that are occurring and have very high turnover in their credit management departments.  We always suggest utilizing a short sale facilitator that has contacts with the banks and lenders, experience, and that we have worked with
before.  Effecting a successful short sale for a client should NOT be a ‘learn as you go’ process for your real estate broker!

Exactly how does a Short Sale timeline proceed?

First week – Meet with your short sale real estate broker.
Contact and gather information required for short sale coordinator.
List your home for sale, the real estate broker should have professional pictures and videos tours taken of your home.
Prepare your home for showings to potential buyers.

Second week thru 6th week – By now you should have had multiple showings (between 10-20), and have a workable offer to submit to the bank.
Your real estate broker will be working with the short sale coordinator and you to gather any additional info and submit the offer to the bank.
The bank special assest manager (or their designee) will open a file for your home sale.

7th week thru 12th week – You should be fairly close if not approved for a
short sale at this time.
Hopefully the initial buyer will still be around.
If  not, the bank can still approve the short sale as a predetermined price.
Your home will still be aggressively marketed to take backup offers from potential  buyers.

13th week thru 20th week – This is the target timeframe and most likely time frame in which your house will actually sell and a closing will occur.

There are many factors that will affect the timeline above.  What lender you have?  What, if any, stage of the foreclosure process you are in.  Will you have to substitute buyers?  An experienced short
sale broker will be able to help, guide and and keep you informed thru this difficult process and will greatly increase the likelihood of success!

As always, always obtain legal and tax advice before making a decision between a short sale or a foreclosure. 

Walmart opening near Quebec Run in Thornton

Monday, August 9th, 2010

New Thornton Colorado Wal mart opening

The newest Wal-mart in Thornton, CO just opened July 21, 2010 at 128th Ave and Quebec street.  This is right across the street from the
Quebec Run homes in Thornton, CO.

This Wal-mart is a
supercenter open 24 hours a day with a nail salon, hari salon, vision center and Subway sandwich shop.  Addtionally, the pharmacy will be open until the early evening hours.  This store includes full bakery, groceries, deli, and even a full liquor department.  The overall store is huge at 202,000 square feet.

While you may or may not be a fan of Wal-Mart stores, company policy or their net affect on America, many people still  shop their and the location next to the Quebec Run neighborhood will only add to the conveniece factor for the homeowners in the community.

Thornton Colorado Home For Sale

Sunday, August 1st, 2010

Check out the link below about this amazing deal!

Thornton Colorado Home For Sale

Highlights about this home in Thornton Colorado for sale are included…

Please contact Stuart Dobson for more information:
Cell Phone: (303) 919-0309
Stuart@stuartdobson.com

30 Acre ranch land in Golden Colorado for sale

Friday, February 12th, 2010

30 Acre Golden Colorado Ranch for sale

One of the last large parcels of ranch land in Golden, CO Mountain views and development potential for 120 single family home lots.  Currently there is a rustic home on the property with three bedrooms, one and 3/4 baths and a wood burning fireplace.  The home is on a well and septic system.

Horse Property and ATV riding

This ranch land is bordered on the East by North Table Mountain Village subdivision.  The homes there are selling in the $400k range on 6,000 square foot lots.  The land has barns, sheds and fenced corral and a pasture in back for horses.  Additionally, the Van Bibber creek runs across the property.  If you are looking for an incredible investment opportunity, that you can also live in, this is it!  Obviously, there is plenty of room for storing an RV, trailer, riding horses, riding ATV’s or dirt bikes.  The land is currently set up for a horse operation with agricultural zoning. 

Excellent Golden Colorado location

Located close to an existing equestrian center, this home and land has easy access to I-70, US 6, the Boulder Turnpike and the Northwest Parkway E-470.  The physical address is 19375 W. 58th Avenue, Golden, CO and is located just East of Highway 93 and the newly designated Jefferson Toll route.

Offered for sale at $999,999.  Previously under contract for $3.5 Million!

Offered Exclusively by:
Surety Realty Inc.

Jason Pavlovic – 303.667.1622 direct
Jason@suretyrealty.com

Stuart Dobson – 303.919.0309 direct
Stuart@suretyrealty.com

Buying a Short Sale home in Colorado

Tuesday, February 9th, 2010

Another story about why banks are irrational and insane when dealing with short sales

To make a long story very short.  I have a very well qualifed buyer (821 credit score, $100k plus down, salaried job for the governement, etc.).  We found a house that another Realtor has listed as a short sale.  This other Realtor is also experienced, knowledgeable about the area and well versed with short sales.  The house was appropriately priced at $340k, we made an offer for $325k….everything is ok so far.

The bank short sale processor gets involved

And everything goes to hell.  The banks BPO appraisal comes in at $375k!  Out of area appraiser, and the bank processor will not consider an appeal.  Both the listing Realtor and I know this BPO is way off target since no model of this house in this neighborhood has ever sold for more than $355k (even in the height of the housing boom).

Time, Money, and Frustration

So, the sellers have paid for a real appraiser to come in and do a rational appraisal in the hopes that the bank processor has a superviser that the listing Realtor can get in touch with.  Meanwhile the buyer is being patient, even though this process has now dragged on for three months with no end in sight.

The home sellers are frustrated, the home buyer is frustrated, and both of us Realtors are frustrated.  But at least the bank processor still has a job and is collecting a paycheck for the outstanding job she is doing ;)

Ahh, it’s good to be involved with Short Sales!

How Banks are hurting themselves with listing agents doing short sales

Tuesday, December 1st, 2009

How banks are making mistakes with real estate agents doing short sales

Working toward the same goals

In theory the incentive a listing agent has to sell a house for more money has to do with the fact that their commission is directly tied to the final sales price.  This aligns the agent financial goals along with the sellers.  However, now that residential short sales have become commonplace in this market most banks have mandates that total commissions on short sales will often only be 5%.  This may contradict the listing agreement that the agent has signed with the sellers, but since the banks have the final approval on the short sale, the listing agreement that defines the commission paid really becomes secondary. 

Commission reductions

I’ve done my fair share of short sales acting as both a buyer’s agent and a seller’s agent both for
residential as well as commercial short sales.  I’ve also had banks demand that the total commission be reduced on every single sale, some as low as 4% total.  While I’m not going to go into the end results of these demands from the banks, it’s important to remember that we as listing agent  wind up acting for two interests, the sellers and the banks.  And many times, with the banks trying to lower commissions and the sellers just wanting to get rid of the property as fast as possible, those two interests collide.

Sales delayed

For example, banks demand that the property be continuously marketed until short sale approvel is given, however, by doing so the sale process can be delayed if multiple offers are submitted.  Most agents I know of are taking and submitting only the first offer that comes in.  This protects the buyers interests, the sellers interest to get the deal done quickly, but not the banks interest to obtain the most money possible for the sale.

commission reductions = wrong decisions

Banks demanding that commissions be reduced causes the agents to act in the other parties interests by encouraging fast sales rather than maximizing price.  If the banks would not insist on commission reductions they would probably get better results as the agents would feel that their efforts are going to be rewarded rather than attacked.  The way that the banks are acting is forcing listing and buying agents to align somewhat against the banks interests.  If the banks would speed their response times and leave the listing agreements alone, the sellers and banks would be much better off.

The perfect Colorado Vacation Home

Saturday, August 15th, 2009

How to Look For a Perfect Vacation Home

Vacations are great ways to relax and rejuvenate yourself, but if you’re not able to enjoy yourself as you should because of the lousy dump they call a hotel, then the money and time spent on this sojourn are just not worth it. If you’re going away in order to get away from the maddening crowd, it’s best to rent a vacation home rather than stay at an impersonal hotel. For one, you get complete privacy, and for another, you get the comforts of home away from home. So if you’re looking to rent the perfect vacation home, here’s how to go about it:

• Do your research: Rather than choosing the first home you see or know that’s available for rent, do your research and see how well the place is maintained and find out about all the comforts and facilities that are available at your disposal. If you do know people who have vacationed at the same location before, ask for recommendations. Some companies offer virtual tours on the Internet so you can actually see the place before you get there, so use this facility to see exactly what you’re getting.
• Call ahead: You need to talk to people rather than just email them and get responses because the personal factor must come into play. Don’t use your calls to just make reservations; instead, ask about the facilities available at the vacation home.
If you value your comfort, then you may need maid services, room delivery and other options. If not, check out how well stocked the kitchen is so you can make your own food.
• Learn about the neighborhood: It’s not enough to just see the interior of the home you’re going to stay in; you also need to check out the general locality and neighborhood to determine if it’s safe enough to
venture out on your own, especially in places where you know crime is rampant.
• Don’t send money ahead: Unless you’re certain that you’re going to get all that is promised, do not send any money for a reservation. If you must pay ahead, use your credit card so that you can stop payment in case the terms of your service are not met.

A vacation home must be a home away from home, one that makes your holiday relaxing and enjoyable. But if you are used to having people wait on you hand and foot, you would be better off going to a good hotel.

By-line:
This article is written by Kat Sanders, who regularly blogs on the topic of a construction management degree at her blog The Fixer-Upper Blog. She welcomes your comments and questions at her email address: katsanders25@gmail.com.

Things to do in the Colorado Mountains in the summertime

Wednesday, May 13th, 2009

Get Ready – Summer in Colorado is Almost Here

What Is There To Do in Colorado?

As vacation time approaches, families wonder just exactly what to do with the lazy days of summer.  Colorado has so much to offer.   The following is a sampling of only some of the activities available to you right here in our home state.

Breckenridge gets to be 150 years old this year.  As early as 1860, local residents were skiing to get around town.  Now, the locals and many out-of-towners ski the slopes during season, but walk or drive to get out and about.  The town was established in 1850 by some prospector’s who came looking for gold.  Some even found the “pot of gold”, others discovered an incredible lifestyle in incredible surroundings.  There are special events in town all summer long.  Check out the Breckenridge CO website to find something about the town’s history on the biking, hiking and Nordic ski trails as well as the improvements being made to historic sites and museums.    The Grand Celebration will be August 8-9, 2009.  There is something for everyone.  Check it out.

Colorado Springs has a multitude of places to visit and things to do.  One of them is the Pikes Peak or Bust Rodeo.  It runs from July 8 – 11th. You get to see steer wrestling, bareback riding, tie-down roping, bull riding, saddle bronc riding and team roping.  You even have rodeo clowns and more.  If you are a car buff, you just might want to return to the Springs for the Pikes Peak International Hill Climb on July 19,  2009.  You can see some of the weird, bizarre and humorous photos of the race found there.  It is amazing what people can do with, in or over a car!

Evergreen Colorado also has a parade and rodeo June 19-21, 2009.  Evergreen is a wonderful place to visit, to play or even to live.  It is 7,200 feet high so you get very mild temperatures even in the summer and the winters aren’t bad either.  Evergreen Lake features boating, fishing, birding, ice-skating, weddings and concerts.  They have mountain parks and miles of trails to hike, bike, snowshoe or horseback ride.  The Evergreen Chamber of
Commerce
will tell you everything you want to know about their various activities available.  It is only 35 minutes from Downtown Denver off I-70.

If baseball is your game, check out the JUCO Tournament.  This is the Junior College World Series.  Games 18 and 19 are being held May 29 and 30th, 2009.  Professional baseball can also be found in Denver as played by The Rockies, although so far they are off to a rough start this year…

For those peach lovers, you haven’t had a great one until you have experienced a Palisade Peach.  They are the most luscious things you have ever tasted!  The Peach Festival in Palisade runs from August 13 through the 16th, 2009.   There are shops, artists, fruit stands and orchards, restaurants, wineries, bed and breakfasts, historic walking tours, biking and rafting trips and a Sunday Farmers Market.  Sounds to me like a visit to Palisade Colorado is definitely called for.

If you haven’t had enough of “rodeoing” try out the Steamboat Springs Hot Air Balloon, Rodeo and Art in the Park July 11 and 12.  Like much of the Rocky Mountain area, Steamboat Springs is a year round event with something to do winter, summer, spring or fall.  The best place for more information is www.steamboat-chamber.com.

Telluride offers another great Colorado experience.  The Bluegrass Festival held June 18 – 21, 2009 is a national event.  You might be too late to make your reservations already but you can try.  June, July and August in Telluride are a true experience.

Last but certainly not least is Winter Park.  The resort opens for summer June 13th through September 7th, 2009.  The YMCA of the Rockies is based here for a great family get away – no television, no radio, no cell phones – just peace and quiet in a beautiful setting.  Through out the season you have everything from rodeos, to a chili cook off to bike races to the Grand County Blues Fest, to the 17th Annual Salute to American Veterans Rally and Festival (August 14-16) where 40,000 motorcycles are expected.

Plan your outings now and enjoy our beautiful state – Colorado. – by Jacqui Jeffress