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Institutional investors are buying distressed homes, fixing them up and renting them in the Denver market.

Institutional investors making their way to Denver

Posted on 4/2/14 8:47:52 AM

Ryan McMaken, an economist with Colorado Division of Housing, isn't surprised to see institutional investors consistently outbidding the average house flipper.

"It is easy to outbid somebody if you come to the deal with a bunch of cash," McMaken told The Denver Post. "If you have a motivated seller, and someone comes to you with a bunch of cash, who are you going to pick?"

Institutional investors, known as non-lender buyers who have bought 10 or more homes ‡ over the past 12 months, are starting to hit the Denver market by force. Institutional investors were making hay in the distressed market of Atlanta and Phoenix, but those two cities are starting to rise from economic deficiencies, making it less profitable for institutional investors to be there.

Rise of institutional investors
Ron Throupe, an associate professor at the University of Denver's Daniels College of Business, told the Post that the trend has been for institutional investors to buy distressed homes and then rent them out for big returns in a tight Denver market.

"What is going on is that the private people who tend to do flips - buy something and then sell it - are getting out-bid on the foreclosures and distressed sales because institutional investors don't need as big of a return," Throupe? said.

Daren Blomquist, RealtyTrac vice president, said those investors are now attracted to Denver because a starter home in the city is available for $200,000 or less. Blomquist also told the Post that the Denver market has "strong underlying market fundamentals, including low vacancy rates, low unemployment and solid job growth."

If a Denver homeowner recently was thrust back into the job market after landing an employment opportunity, now might be a good time to consider a home equity line of credit if they wish to remodel their home but don't have the cash flow. A home equity line of credit gives a homeowner cash for student loans, a down payment on a car or home renovations if they put their home down as collateral. It's a great way to let your home pay you back.

It's a surprise
The abundance of investors in Denver is somewhat shocking considering there seems to be less everywhere else in the country.

According to The Press-Enterprise, institutional investors made up 5.2 percent of all residential ‡ property sales across the nation so far in January 2014, a three percent drop from January 2013, according to RealtyTrac.