Wednesday, December 31, 2008


Here's an investment formula to consider as you close the door on 2008 and ponder what became of your 401k in the last four months of the year.

Take a look at a four bedroom, two bath home in Arvada priced at $165,000 as a bank-owned "REO". Purchase it with 20% down - your cash out of pocket is $33,000 (we can often cover closing costs by negotiating for them with the bank).

With interest rates in the low 5's (let's say 5.5%), your 30-year fixed rate payment on a $132,000 loan is about $750.00 per month. Throw in $200 per month for taxes, another $100 for insurance, and another $150 for property management (assuming you choose to hire someone to do it for you), and your total payment is $1,200 per month. The taxes, insurance and property management costs are estimated on the high side, but we want to be conservative in our estimates.

Rent the home for $1,400 per month, and your annual cashflow is $2,400. On your original investment of $33,000, that's an annual "cash on cash" return of just over 7%, not counting your possible mortgage interest deduction, depreciation or principal paydown.

After five years, your "cash on cash" return is now 36% ($12,000 of cash flow on a $33,000 investment). Your principal has been paid down to $122,048 and we still haven't factored in the possible mortgage interest deduction or tax benefits of depreciation.

After 10 years, your cash flow (assuming you are a really nice landlord and never raise the rent) is $24,000. Your principal has been paid down to $108,954, giving you another $24,000 equity stake in the property.

Again, these numbers are for illustrative purposes only, but they demonstrate the point - when you can find real estate in good areas with cash flow potential from day one, your success is almost guaranteed.

Of course, with my investors, we aren't just looking for cash flow, we're looking for properties near light rail or mass transit lines or close to universities or near other locations that will always put the land at a premium. We're going to look at areas with high rental demand and stable neighborhoods. We're going to research our comps and strive to buy with equity going in, not hoping that future appreciation bails us out of a mediocre investment.

Seriously, there has not been a better rental market in Denver in at least 20 years. What are you waiting for? At the very least, you owe it to yourself to become educated. Because with a trillion dollar (or more) "Money Bomb" coming in the form of government spending initiatives, you had better have a strategy to keep up with inflation in the years ahead.

We are all entitled to our opinions, but I believe these interest rates in the 5's are an anomoly and temporary. Inflation (and the devaluing of US currency) is the fastest way out of this recession, and that's what I see happening.

If you would like to start receiving new foreclosure listings by email, just give me a call and I'll set you up with immediate access through my Home Scouting Report program.

The time to take control of your financial future is now.

Wednesday, December 24, 2008


Colorado was the fifth-fastest growing state in the country last year, according to an article in the current issue of Forbes Magazine. Colorado added over 97,000 residents in the survey, moving up from eighth in last year's rankings.

Nevada, which has been battered by foreclosures and job losses, fell to eighth last year after being ranked in the top four for 23 consecutive years.

With new residential home construction essentially non-existent in the state, the addition of yet another 100,000 new residents should provide more spark to a recovering housing market - and more competition for an already scarce inventory of rental homes.

Utah, Wyoming and Idaho also ranked in the top ten states for growth, showing again that the mountain west region is alive and well, even in a down economy.

Sunday, December 21, 2008


I gave a presentation this past Tuesday before members of the Arvada Chamber of Commerce. My speech was entitled "FIVE THINGS I HAVE LEARNED (OR RELEARNED) IN 2008". And while the reality is we all learned many things in 2008, here are a few of the lessons that stand out to me:


Quite simply, the philosophy I carry in my business is that every day, I am preparing myself for tomorrow. The truth is that people are going to buy and sell homes with or without me. It is my job to become a compelling product in the marketplace, offering skill, insights and experience that my outpaces my competition.


Jim Rohn says, "Don't wish that things were easier. Wish that you were better."

That's the challenge for all of us right now. Get better. Get stronger. Become more skilled at every aspect of your job. And while you're at it, recommit to strengthening personal relationships like never before.


To me, personal philosophy is as important as a good education. In other words, what you believe is at least as important as what you know. Often your beliefs are more important than your understandings. What you think about things - whether there is scarcity or abundance, whether there is loss or opportunity - is based on your philosophy.

And who you associate with plays a huge role in shaping your philosophy. The people in your life are like the weather... either sunny and pleasant, or cold and stormy. It's amazing to me how many people choose to live in a reality that is cold and stormy.


I have been beating on this theme for two years... quite simply, it's the best first-time buyer / investor market in 15 years.

Want a deal that cash flows? Call me! Want to pay less for a mortage than you do in rent? Call me! Need $7,500 to fix up a foreclosure and make it your dream home? Call me! Want a 30-year fixed rate below 6%? Call me!


There's a saying you'll hear around our household often, and it goes like this: "These are the good old days".

We've got our health. We've got our business. We've got friends and colleagues who are eager to refer us to their friends and colleagues. Our kids are doing well in school. Really, how much more do you need?

Yes, 2008 has been a challenging year. But I'd like to think that the end result is not of loss, but of gain... that we became better by leaning into the challenges that arose while others quit or left the business.

Don't with that things were easier. Wish that you were better.

And then make it so!

Thursday, December 11, 2008


Is this a sign of confidence? Or desperation?

You decide.

Certain builders in the Denver area are wooing buyers by offering to buy back properties if their values drop, according an article appearing this past Sunday in the Denver Post.

For instance, Celebrity Custom Homes is putting 10 percent of the purchase price of each home into an escrow account. If the home's value has dropped after three years, the buyer gets the money. If not, the builder keeps it.

Everest Development Co. is telling buyers that if they live in the property for three years and if at that point, its value has declined, they can choose to have Everest repurchase the home.

Byers Street Properties is offering to refund a percentage of the purchase price of any home equal to the decline in its value based on the S&P/Case-Shiller home price index.

The list of builders that have gone bankrupt (Village Homes, Neumann Homes), scaled back operations (McStain, Richmond American) or announced plans to leave the state (Centex, Beazer) is historic and remarkable.

Right now, there's one segment of our market that's robust - buyers looking at homes under $250,000 (and homes at that price point are generally not very profitable for builders).

Markets change... they always do. But I'd be careful with an offer like this, because if these homes do go down in value, will the builder even be around to take your call?

Sunday, December 7, 2008


Went to the Parade of Lights in Downtown Denver Saturday night with my wife and two daughters. What an event!

Joined by nearly 175,000 fellow Denver-ites on a positively balmy 55 degree December night, we watched floats, marching bands, dancers and giant character balloons make their way through the downtown district in a parade that lasted nearly 90 minutes.

(Sign of the times: Victoria, below on the left - and Elizabeth, perched atop the shoulders of a local real estate broker who shall remain nameless - had absolutely no frame of reference for Dennis the Menace when his character balloon passed by during the parade. In a related note, the Rocky Mountain News announced this week that it will be shutting down in January if a buyer can't be found for the struggling newspaper in the next 30 days.)

The best thing about the parade - it really made Denver feel like a community, with so many people from such diverse backgrounds joining together to celebrate the season.

The second best thing - watching THOUSANDS of people board light rail trains heading home after the event. (For the relevance of this, see my Fastracks POSTING from October 30)

The completion of Denver's light rail system is going to be huge economic winner for the region - and for property values along the newly added routes - as the final spokes of the grid come online over the next few years. It will also provide the infrastructure for events like last night's Parade of Lights to become even larger as our region becomes better connected.

Last night was a great night to be in Denver. Kudos to Mayor Hickenlooper, the city and the thousands of volunteers who put together a fabulous community event!

Tuesday, December 2, 2008


Foreclosures are down in Colorado by 14% in the first nine months of this year while national statistics show foreclosure filings throughout the country increasing by over 120%, according to a new report by the Colorado Division of Housing.

A total of 16,246 foreclosures have been completed in Colorado so far in 2008.

"2006 and 2007 saw big increases in filings of 30 to 40 percent," said Kathi Williams, director of the Colorado Division of Housing. 'There are still reasons for concern, but this is good news."

Denver County has shown the biggest drop in foreclosure filings this year, down 26 percent compared to the third quarter of 2007. Weld County foreclosures are down 20% and Adams County foreclosures are down 19%.

Increased pressure on lenders to work with troubled homeowners and massive funding commitments by the Federal Reserve to purchase mortgage loans from private lenders are also reducing the number of owners losing their homes.

Again, the story in our market right now is the massive disparity between the firey demand for homes under $250,000 and the ice cold condition of homes at higher price points.

Investors and first-time buyers continue to compete for well-priced entry level homes, while those with more exposure in the stock market (normally those at higher price points) are licking their wounds and pulling back.

Further government efforts to slow foreclosures figures to thin out our inventory even further in 2009.

Historically, the leading indicator for a housing market recovery is finding a "bottom" and then seeing entry-level prices begin to rise. While the nation's housing market remains very uncertain, the Denver Metro area appears to be on the backside of its troubles.