Denver rental property investing still works, but only if you underwrite three line items most out-of-state buyers skip: a six-month eviction reserve, mandatory professional management, and 20-25% down. Lonnie Glessner, a Denver-area mortgage loan officer who has been financing investors since 1998 and owned rentals since 2002, puts the all-in cost of a single bad tenant at $30,000 to $40,000.
The bigger shift is that appreciation no longer covers underwriting mistakes. Colorado posted negative net migration last year for the first time since the late 1980s, national builders can’t move product without rate buydowns costing them 8-10% of the loan amount, and the metro condo market is down roughly 14% over four years with up to nine months of inventory.
What follows: what an eviction actually costs, the down payment math on a real Denver condo deal, how DSCR pricing compares to Fannie and Freddie right now, and the supply picture you need to read before you sign anything.
Key takeaways
- Budget a minimum six months of mortgage payments in reserve for any Colorado rental, plus legal fees and repair costs — Glessner puts a full eviction at $30,000 to $40,000.
- DSCR lenders may advertise 10-15% down, but Denver prices realistically require 20-25% down for a deal to break even.
- DSCR loans allow 3-4%+ in seller concessions versus Fannie and Freddie’s 2% cap, which is enough to buy the rate down meaningfully — the tradeoff is a 3- to 5-year prepayment penalty.
- Colorado net migration was negative by roughly 12,000-13,000 people last year, the first time since the late 80s, while builders in the Aurora area have told planning officials they may pull no permits for 12-24 months.
- If you flip in metro Denver, buy in Q4, keep the rehab short, and relist by March or April — six- to nine-month rehabs don’t survive holding costs unless you’re all cash.
From the Real Estate Pros Show
This article draws on an interview with Lonnie Glessner of CMG Home Loans on the Real Estate Pros Show, hosted by Dylan Silver.
What a Colorado Eviction Actually Costs You
Assume six months minimum to remove a non-paying tenant in Colorado, and reserve accordingly. That is Glessner’s standing rule for every investor he finances, and it is not a worst-case number — it’s the planning number.
Build the reserve as three separate buckets:
- Six months of full mortgage payments — principal, interest, taxes, insurance, and HOA if applicable, sitting in the bank before you close.
- Legal fees — you will be hiring an attorney, and the timeline drives the bill.
- Repair costs — Glessner’s blunt version: they are going to damage your property. Plan on it.
Stack those and you reach $30,000 to $40,000 without trying hard. On a $200,000 condo with 25% down, that is roughly two-thirds of your equity contribution wiped out by one tenant.
The reason this belongs in the pro forma rather than in a mental “tail risk” bucket is that Colorado’s tenant protections have tightened materially over the past several years. Glessner, who has been through evictions himself, says the state is now worse for landlords than California from what he hears. His first eviction 12 years ago took about 45 days under the old rules. The same situation today runs many times longer.
Practically, this changes what a “cash flowing” property means. A unit throwing off $300 a month nets $3,600 a year. One eviction event costs you a decade of that cash flow. If your model doesn’t carry an annualized reserve contribution against that risk, your model is wrong — and the appreciation that used to paper over the difference is not currently showing up in metro Denver.
Why He Won’t Self-Manage in Colorado Anymore
Glessner managed his own condos and single-family rental for years. He now tells every investor he works with that nobody should self-manage in Colorado. “There’s too much risk, too damn many rules and restrictions.”
The screening process alone is the clearest example. He used TurboTenant for years and questions whether a product like that is even usable under current Colorado rules. Layer on pending state legislation targeting AI — which he expects to reach mortgage underwriting as well as tenant screening — and the compliance surface keeps expanding for a self-managing owner who is not tracking it full time.
The second argument is about tenant profile, and it’s the one out-of-state investors miss. Glessner self-managed condos because the tenants were people who could arguably have bought a home; several of them later did, using him as their loan officer. When he owned two fourplexes in the Colorado Springs area, he hired professional management from the start. Fourplexes are the most affordable housing type in a given submarket, which means a different applicant pool and a different level of management intensity. Distance was a factor — the properties sat an hour to 90 minutes from his home — but the tenant mix was the deciding one.
Underwrite management as a hard 8-10% expense line, not an optional cost you’ll absorb yourself to make a marginal deal pencil. If a Denver deal only works because you’re managing it free, the deal doesn’t work. And if it breaks when you add professional management, you’ve just learned something useful before closing rather than after.
You’ve got to know it’s going to take a minimum of six months to evict someone. So you’ve got to have at least six months of mortgage payments saved in the bank, plus legal fees, and please just know, having gone through evictions, they’re going to damage your property. You could easily spend $30,000, $40,000 to evict someone.
— Lonnie Glessner, mortgage loan officer, CMG Home Loans (Denver)
The Down Payment Math: What It Takes to Break Even in Denver
DSCR lenders will sometimes go to 10% or 15% down. In Denver, Glessner says you realistically need 20-25% down to break even, because prices are high relative to rents. That gap between what a lender allows and what the math requires is where out-of-state investors get hurt.
A live example he ran the morning of the interview shows what a deal that actually works looks like:
- Two-bedroom, one-and-a-half-bath condo in southeast Denver, roughly 1,000 square feet, built in the 1970s
- List price: $143,900
- Loan amount: $100,000
- Principal and interest: about $650 per month
- All-in with taxes, insurance, and $570 monthly HOA dues: $1,350 to $1,400
- Market rent, even in the current downturn: $1,700 to $1,800
That’s roughly $350 to $400 of gross monthly spread before vacancy, management, and reserves. Note the down payment: about $44,000 on a $143,900 purchase, which is 30% — above his own 20-25% guidance, and part of why the numbers clear.
His reaction to the deal is the takeaway. He was shocked when he pulled the price, and his summary was that it’s rare to see a property cash flow that easily in Denver anymore. Also note the $570 HOA. That is nearly as large as the mortgage payment, and HOA dues in Colorado have been climbing hard. Treat any condo pro forma with a fixed HOA assumption as optimistic, and stress-test it upward before you commit.
Financing Investment Property: DSCR vs Fannie and Freddie
Start with points, because they’re on every investment property loan whether you notice them or not. One point equals 1% of the loan amount. Fannie Mae and Freddie Mac charge points on every investment property loan — Glessner puts the minimum around .625% even at 25-30% down. Investors have been paying them for decades; it’s baked into the product.
Against that baseline, DSCR has gotten competitive rather than just convenient. Pricing a $500,000 DSCR loan the day before the interview, Glessner got a rate in the mid-6s with about 1.25 points and noted it beat what he could do with Fannie and Freddie on the same file.
The structural advantages:
- No tax returns required
- No employment, income, or DTI review — the property qualifies, not you
- Title can be held in an LLC, which is how most investors want to own
- Seller concessions of 3%, 4%, or more, versus Fannie and Freddie’s 2% cap
That concession cap matters more than most buyers realize. When Glessner bought a short-term rental in December using a DSCR loan, he took three points from the seller and spent all of it buying down his rate. Under a conventional investment loan, he’d have been capped at 2% of the sales price for all concessions combined.
The tradeoff is the prepayment penalty, typically three to five years. These loans are sold to institutional buyers — Wall Street firms, hedge funds, REITs — who are buying yield. Early payoff is their largest risk, so they price for it. If your plan involves refinancing or selling inside three years, run that penalty as a real cost before you take the better rate.
Reading the Supply and Migration Picture Before You Buy
Colorado lost population on net last year — roughly 12,000 to 13,000 more people left than arrived, which per the State Demography Office is the first negative reading since the late 1980s. That single data point removes the assumption most Denver buy-and-hold models were built on.
Builder behavior tells the same story from the supply side. Richmond American, D.R. Horton, and Lennar effectively cannot sell a home in Colorado without heavy incentives, and have been marketing rate buydowns for three to three and a half years — into the 5s, often the 4s, sometimes the 3s. Glessner’s read on the cost: those forward commitments run the builder 8-10% of the loan amount. Nobody spends that voluntarily.
Some are now stepping back. A realtor on Aurora’s planning commission told Glessner’s stats committee that several builders have said they won’t pull permits for 12 to 24 months because they’ve built too much. He was relieved to hear it, because he remembers the last cycle: metro Denver builders put up nearly 80,000 homes between 2002 and 2005 against combined net migration of about 10,000 people.
The condo segment is already repricing. A Denver realtor’s analysis published in the Denver Business Journal put condo prices down a little over 14% versus four years ago, with up to nine months of inventory. Rising HOA dues and problems with master insurance policies are compounding it. Glessner has been telling a client of 25 years — an investor who built up to 18 or 19 condos precisely because they were easy to manage — to sell them off, and he’s been doing it.
If You’re Still Flipping Here, Buy in Q4 and List in March
Without appreciation, flip timing becomes the whole margin. Glessner’s rule for metro Denver: buy in the fourth quarter, run a short remodel, and be relisted by March or April, which he calls the best months of the year to list. Q4 is the best time to buy.
That window kills a category of deal. If the property needs a rehab that runs six to nine months, the math doesn’t work once holding costs are priced in — unless you’re all cash, and even then you’re tying up capital through the worst listing months. Aurora prices have been dropping, which means buying right is no longer one factor among several; it’s the factor.
His durability test for flippers holds up across cycles. To survive long term you need to be the agent, the contractor, or both. The operators who last are the ones capturing commission or labor margin in addition to the spread — often a husband doing the work and a wife holding the license. Everyone else is betting on a spread that a soft market can erase. Glessner made this point even about the good years, when 8-9% annual appreciation and 20-30% discounts made it hard to lose money.
One more thing steering retail buyers away from your resale flip: taxes. New construction in Colorado sits in metro districts, and Glessner has to warn buyers their property taxes on a new build will run double to triple those on a 10-year-old home — often $1,000+ per month against a Denver average near $300. That’s a real advantage for your resale product. Make sure your agent is using it.
Frequently asked questions
How much cash should I reserve for a possible eviction on a Colorado rental?
Plan on at least six months of full mortgage payments in the bank, plus legal fees, plus repair costs. Glessner’s total for a completed eviction is $30,000 to $40,000, and he says that figure is easy to reach rather than extreme.
The six-month figure is a floor, not a ceiling. It assumes the process runs without unusual complications, and it doesn’t include the rent you never collect during the process.
Is a DSCR loan better than a Fannie Mae investment property loan right now?
For most active investors, yes — and increasingly on price, not just convenience. Glessner priced a $500,000 DSCR loan in the mid-6s with about 1.25 points and said it beat what he could do with Fannie and Freddie on the same borrower. Add no tax returns, no DTI review, LLC ownership, and higher seller concession limits.
The exception is a short hold. DSCR loans carry three- to five-year prepayment penalties. If you plan to sell or refinance inside that window, run the penalty as a line item before choosing.
What are points, and why do investment property loans always seem to have them?
One point equals 1% of the loan amount, paid at closing. They’re separate from the interest rate, though points are often used to buy the rate down.
Investment property loans carry them because agency pricing requires it. Glessner puts Fannie and Freddie’s minimum around .625% on an investment property even at 25-30% down. It’s been that way for decades, so experienced investors simply build points into acquisition costs.
How much can a seller credit toward my closing costs on a DSCR loan versus a conventional loan?
Fannie and Freddie cap seller concessions at 2% of the sales price on investment property. DSCR lenders commonly allow 3%, 4%, or more.
That difference is large enough to change your payment. When Glessner bought a short-term rental in December on a DSCR loan, he negotiated three points from the seller and applied all of it to buying down his rate — something the 2% conventional cap would not have permitted.
Are Denver condos a buying opportunity now that prices have dropped?
Sometimes, but the discount exists for reasons that persist after you close. Metro Denver condo prices are down a little over 14% from four years ago with up to nine months of inventory, and the pressure is coming from rising HOA dues and master insurance policy problems, not just rates.
Underwrite the HOA line hard. In the southeast Denver example Glessner ran, dues were $570 a month against a $650 principal and interest payment. A dues increase or special assessment can erase your entire spread, which is why one investor he’s advised has been unwinding a portfolio of 18 to 19 condos.
The bottom line
Before you make another offer in metro Denver, rebuild your pro forma with three lines you may not currently have: six months of payments plus legal and repair costs as an eviction reserve, professional management at full market rate, and a down payment at 20-25% rather than the lender minimum. If the deal still clears after that, you have a deal. If it only worked without them, you were relying on appreciation the market isn’t currently producing.
