DENVER (CBS4) – Home prices in the metro area were up in April, showing gains from the previous month and year, with inventory reaching a record low, according to a report released Wednesday. The rising cost to buy a house led two childhood friends to purchase a home together rather than trying to find houses separately. Buying a larger property will let them rent out rooms to help cover the cost of the mortgage.
“The way that Denver is now and how expensive it is, I think like what we did, if buyers can get comfortable with the investing idea where you buy an asset,” Abe Bobb told CBS4. “You can get a very marketable or rentable property that you’d be okay with living in for a year or two, but then if you ever wanted to relocate you could easily rent it out to cover the mortgage plus profit.”
A Colorado native, Bobb moved back to Denver after living in California for 11 years. He did not want to keep paying rent and did not feel like a condominium was the right investment for him. The cash needed for a down payment to the homes he wanted didn’t fit his budget.
“If you wanted to go in on your own house, one, you have to have the cash and two, I think if you’re going in on a loan, a lot of people think, ‘Oh is this going to be my forever house?'” Bobb said outside his new home in the Country Club neighborhood. “If you buy a, like a large or a decent size, three, four bedrooms by yourself and you don’t rent it out, and you can afford it, great for you.”
So he decided to go in on a home purchase with his friend from middle school, Nick Brown. Already living in Denver, Brown had rented for years and he was ready to buy a house as well. He found similar challenges trying to find a house in his budget as a sole owner.
“We realized that our money would go a lot further if we teamed up together and pooled our resources and got together on a mortgage,” Brown told CBS4.
The two friends will move into their home later this month as new numbers from the Denver Metro Association of Realtors suggests rising prices are not likely to slow down anytime soon. The median for detached homes sold in April was $585,000, up more than four percent compared to March and more than 23 percent year-over-year. Data that was likely part of the motivation for these two young professionals to get into home ownership sooner rather than later.
“You got to operate in the times in which you live, we can all say it would have been great to buy five years ago when I first moved back to Denver,” Brown said. “So you’re living and building equity simultaneously for less than it takes to rent a comparable place.”
Brown had already looked into the concept of “house hacking” where a homeowner rents out additional rooms to collect an income that helps cover the cost of their purchase. As investors together, they were not only able to get into a more expensive neighborhood in Denver near Cheesman Park, but also buy a larger house. The home has six bedrooms and they plan to rent out two so they can manage their new mortgage.
“The good houses move quickly so one, you have to be flexible and willing and able to move immediately if you see a house you want because it’s probably going to be gone in a few days,” Bobb said. “For how much money we bought it for, back when I was living in Denver, I would have thought, I would have gotten more, a bigger house.”
Their search started in January and required the pair look at around 40 homes and make multiple offers, all above asking price before finding the right property. Even with their unique strategy, they were not above the competitive fight to win in a seller’s market. But since they received the keys and started moving in some furniture, they believe this approach is already paying off as an investment and securing their future home.
“I think it’s going great, I mean we’re thrilled to be under contract, we love the place that we got,” Brown said. “Knowing what you want and assembling a good team and acting quickly, and taking some deep breaths because it can be frustrating and challenging.”
One more uncommon step the duo took was making an offer on a Sunday night and they say it got a response hours later. Just one of the many necessary moves needed to stay on top of constantly climbing house prices and historically low inventory.
“I thought our dollar would have bought a bit more but Denver’s booming,” Bobb said.