July metro home sales drop 26.6% compared with 2009

The number of homes sold in July in metro Denver plunged 26.6 percent compared with the same month a year ago, according to data released Tuesday.

There were 3,259 homes sold in the metropolitan area last month, compared with 4,440 for the same period in 2009, according to Metrolist data. The decline comes during a month that historically is the premier month for home sales.

"Consumers lost focus on the home purchase this month," said Gary Bauer, an independent real-estate analyst. "Even though we got the best interest rates in history, it's still very difficult to get a loan, and consumer confidence has decreased because of the focus on jobs, the economy, taxes and everything else."

The now-expired first-time-buyer and move-up-buyer tax credits also have affected home sales, stealing demand from the second half of the year.

Home purchasers had until the end of April to put a home under contract to qualify for an $8,000 federal tax credit for first-time owners or a $6,500 tax credit for move-up buyers.

"We had some really robust sales activity in the first half of the year, and now we're suffering the fallout from that," said Lon Welsh, managing broker of Your Castle Real Estate.

Even though the total number of homes sold this year is up 1.9 percent compared with the same period a year ago, Welsh said he wouldn't be surprised if sales volume for 2010 is lower than it was last year.

"The first round of the tax credits were in the fourth quarter last year and stimulated demand and prices," Welsh said. "We won't have anything like that."

Meanwhile, the median price for a single-family home was up 4.4 percent in July to $240,000, compared with $229,900 for the same month last year.

The median price for a condo, however, declined 11 percent to $129,000, compared with $145,500 in July last year.

"Prices (for single-family homes) are still up," Bauer said, "but that is just because historically, July is the move-up month. That's when people are moving up for their families."

Margaret Jackson: 303-954-1473 or mjackson@denverpost.com

Denver No. 8 in Case Shiller

By John Rebchook on July 27, 2010 · Comment · ShareThis

Take a poll at the end of this blog

The Denver metropolitan area ranked No. 8 of the 20 areas tracked by the closely watched S&P/Case-Shiller Home Price Indices released today. Overall, homes in Denver appreciated by 3.6 percent in the one-year period ending in May, compared with a 5.4 percent gain for homes in the 10-Composite list and 4.6 percent for all 20 of the areas, according to the report.

“I like what I see,” said Peter Niederman, chief executive officer of Kentwood Real Estate.

Niederman noted that some of the California markets shot the lights out in May, according to the index. For example, San Francisco showed a gain of 18.3 percent and San Diego home prices rose by 12.4 percent.

California skews stats

“Those California markets were well into the double digits,” Niederman said. “If you remove those, Denver was right up there. I think Denver is a very sustainable market. Those California markets are really a lot of noise.

They’re very volatile. They have big drops, followed by big gains. Denver does not have these violent swings up or down.”

Niederman, and others, however, cautioned that the May numbers still reflect the impact of the tax-credit buying that took place prior to April 30, so the market should brace for a drop.

Still, sellers are increasingly willing to bargain on prices, especially at the higher-end, and mortgage rates are at historical low, providing an ideal buying opportunity for those financially able to take advantage of what is a buyer’s market, except at the lower-end.

Jobs key to housing

“Only the third-leg of the stool is missing,” Niederman said. “We need to see strengthening in our employment. When we see some improvement in the employment numbers that will bring consumer confidence back. No one buys a home when they lack confidence.’

On the other hand, he said that consumers could miss the buying opportunity of a lifetime if they wait, because as the economy improves, it is likely that both home prices and interest rates will rise.

“I do understand there are a lot of people out there who realize this is a great buying opportunity, but aren’t willing, or can’t take advantage of it, because of their job situations,” Niederman said. “Or maybe they lost money in the financial markets, and they can’t make a decision to buy now, even though they know it is a great time to be buying. I remain cautiously optimistic about the market.”

Independent broker Gary Bauer also was encouraged by the Case-Shiller report.

“Once again, I think it shows that Denver is a market on to itself,” Bauer said. “This is another example of how relatively strong the Denver market is. I think it is a positive.”

Bauer, however, cautioned that the May numbers still reflect closing activity from the home buying tax credits, which required buyers to place a home under contract by April 30 and close by September 30.

Frenzy gone

“We’re still seeing the frenzy of the tax credits in the May numbers,” Bauer said. “I think the June numbers are likely to be flat.”

Greg Geller, principal of Denver-based Vision Acquisitions, agreed that tax-credit buying drove a lot of the activity in May, and that has to be taken into consideration. Next month, Geller is likely to be named as the president of the Denver Board of Realtors for 2011-2012.

“The tax credits just brought first-time home buyers out in drove,” Geller said. “Without the tax credits, the market might be far worse and not as bloated, and I’m saying that for across the country. Not only did the tax credits bring out more first-time buyers, but it also likely led to more sellers testing the waters. “If you were planning to sell your home next year, you might very well have tried to sell it during the time of the tax credits,” Geller said.

Falling off the earth

John Sullivan, co-owner of RE/MAX of Cherry Creek, said that “while I can believe” the Case-Shiller report was a pretty good indicator of what happened in May in the Denver area, he said he expects the downturn to be quite severe later this year.

“I think the housing market is going to fall off the face of the earth in July or August,” Sullivan said. “I have six or seven listings right now and nobody is making any offers. And some of them are considerably cheaper than they were of the pre-expiration date,” of April 30 for the tax credit deadline.

He even told his son not to rush out and buy a home before the tax credits expired, as he expected that prices would fall when the tax-credits expired.

Not only have home prices softened in many cases, but interest rates fell from an already low level. While that may help existing homeowners that can qualify to refinance, it seems to be doing little to get jump-start the home buying market, he said.

Low interest rate not enough

“I think if they would drop the rate to 3.5 percent it would not make that much difference,” Sullivan said. “Well, a 3.5 percent rate would drive some people to buy a house, but not that many. If 4.5 percent rates aren’t doing it, I don’t know that a lower rate would make that much of a difference. If you don’t have a job, or you are not secure about your job, you’re not going to buy a home no matter how low interest rates are.”

He said that buyers are pickier than they have ever been.

“Everyone wants the good stuff,” Sullivan said. ‘They want the granite and the stainless steel, the location and the ‘Wow’ factor. The prices of the homes that have all of these things, have held up reasonably well. But if you have an average or below-average home, the price might have dropped 10 percent since May 1,” since the tax credits have expired.

National market bouncing along the bottom

Nationally, the overall market, for the most part, appears to have bottomed more than a year ago, but could continue to bounce along the bottom for quite some time.

“While May’s report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery,” says David

M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level. The two Composites have

improved between 5 and 6% since then, but this is no better than the improvement they had registered as of October 2009. The last seven months have basically been flat…It still looks possible that the housing

market might bounce along the bottom for the foreseeable future, before showing any real improvement that will filter through to the rest of the economy.”

MSA	Change from January 2000	April-May	1-Year Change
Atlanta	7.82%	2.0%	1.1.7%
Boston	55.95%	1.6%	4.8%
Charlotte	16.39%	0.3%	-2.8%
Chicago	21.9%	1.2%	-1.5%
Cleveland	5.85%	1.0%	3.7%
Dallas	19.93%	1.5%	2.9%
DENVER	28.24%	0.6%	3.6%
Detroit	-31.7%	0.7%	-2.5%
Las Vegas	2.35%	-0.5%	-6.5%
Los Angeles	74.67%	1.7%	9.7%
Miami	46.33%	0.9%	1.2%
Minneapolis	22.63%	2.8%	11.6%
New York	70.45%	0.8%	-0.4%
Phoenix	11%	0.9%	7.2%
Portland	47.98%	1.2%	0.7%
San Diego	63.11%	1.1%	12.4%
San Francisco	42.16%	1.7%	18.3%
Seattle	46.82%	1.2%	-1.4%
Tampa	38.29%	0.9%	-1.5%
Washington, D.C.	82.10%	1.5%	2.4%
Composite-10	59.36%	1.2%	5.4%
Composite-20	46.43%	1.3%	4.6%

Note: There is a poll embedded within this post, please visit the site to participate in this post’s poll.

More Real Estate News from John Rebchook's Inside Real Estate News

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.!
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Stocks Up, Foreclosures Down: Is Real Estate Going To Bounce Back

By Donald Griffith on July 16, 2010, 8:05 am

Perhaps the article title should be changed: Foreclosures Up, and stocks and real estate down. Hold on, folks. Let’s not get ahead of ourselves with all this acrimonious propaganda. Unless Realty Trac foreclosure service has prescient inside information or a crystal ball, let’s leave this paragraph as is and answer this question: How is real estate going to bounce back?

Will The 2010 Election Help Real Estate

Some national pundits have determined that real estate will bounce back especially in some of the top 10 states who are suffering the most. Nevada, who tops the foreclosure list with one in 17 households getting the boot, is a prime example of a possible monolithic real estate bounce. The remaining nine troubled states: Arizona, Florida, California, Utah, Georgia, Michigan, Idaho, Illinois and Colorado could also leave the bottom of the barrel into the sunshine if changes are made in the 2010 election.

What Will Help The So-Called Real Estate Bounce

Visionary investors who in a prior real estate life opted to eschew investments because of the sour economy, job losses and every other red flag some naysayer wanted to raise on the pole of despair, are now giving residential and commercial investments a closer look. Especially in one or more of the top 10 troubled states. First time homebuyers are also starting to take the lock off that piggybank and look for affordable housing too. Very cheap housing will be the hand that bounces the comeback real estate ball.

3rd-party foreclosure sales 30% of Colorado market

Inside Real Estate News

Colorado's Real Estate News Source

3rd-party foreclosure sales 30% of Colorado market

There were 4,535 distressed home sales in Colorado in the first quarter, accounting for slightly more than 30 percent of all of the homes sales in the state, shows a national report released today.

The report by RealtyTrac, based in Irvine, Calif., for the first time released a report tracking third-party sales by banks. The sales, which occur during any phase of the foreclosure process, typically fall into two broad categories, Rick Sharga, spokesman for RealtyTrac told InsideRealEstateNews. The first category is short sales, in which the bank agrees to accept less than the mortgage amount. The second category is after the bank has acquired the home in what is known as a REO (Real Estate Owned) and subsequently sells it to someone else.

In the fall, RealtyTrac plans to start breaking out short-sale data for each state, Sharga said.

An earlier report by the Colorado Division of Housing, showed 6,686 foreclosed homes being sold at public trustee auctions in Colorado during the first quarter.

Tracking short sales

“Our number for total sales is very close to that number,” Sharga said. “With this report, w were looking at third-party, arms-length sales. We did not count the foreclosure sales when the bank was the highest bidder.” Banks often bid the amount of the outstanding loan, as that does not cost them any money out of pocket. Investors can bid more, if they think the house is worth more. Typically, if a house had equity in it – that is the house had value beyond the loan amount – the homeowner would be better off selling the home on the open market. It’s estimated that nationally, one out of every four mortgages is underwater.

“There 4,535 number does still seem surprisingly low,” said Ryan McMaken, of the Colorado Division of Housing, who researches and authors state-wide foreclosure reports. “RealtyTrac is obviously using a different methodology that we do. I think their data will be valuable for future comparisons, rather than the absolute numbers.”

We’re talking $866 million in home sales

According to RealtyTrac, first-quarter, third-party foreclosure sales are down 30.21 percent from the first quarter of 2009 and down 16.79 percent form the fourth quarter of 2009. That is down slightly from the respective national averages of 33.18 percent in the third quarter 2009 and 14.04 percent in teh fourth quarter. The average sales price of a a home was $191,006, about 11 percent higher than the national average of $171,971. The total value of the 4,535 homes is about $866.2 million. The overall average discount was 24.51 percent. In other words, it would be more than $1 billion of homes impacted, if they could have fetched market prices. The average REO discount in Colorado was 30 percent, compared with 34 percent for the nation, while the average pre-foreclosure discount was 17.62 percent in Colorado, compared with 14.77 percent for the nation.

“I think Colorado has settled down quite a bit,” Sharga said. “I don’t think they are out of the woods, yet. I think the worst is over, unless you get hit with another wave of unemployment. Colorado does appear to be in danger of that happening, and Colorado seems to be weathering this economic storm better than most places.

McMaken, of the housing division, noted that foreclosure activity was peaking in 2007 in Colorado, at a time when the rest of the nation was just staring to feel the brunt of record numbers of people losing their homes.

National numbers

Colorado accounted for about 2 percent of the 232,959 U.S. properties in some stage of foreclosure — default, scheduled for auction or bank-owned (REO) — sold to third parties in the first quarter, a decrease of 14 percent from the previous quarter and down 33 percent from the peak during the first quarter of 2009, when sales of foreclosure homes accounted for 37 percent of all residential sales.

“First time home buyers and investors continue to buy foreclosure properties in large numbers, and at substantial discounts,” said James J. Saccacio, chief executive officer of RealtyTrac. “As lenders have begun repossessing homes at record levels over the first half of 2010, it will be interesting to watch how they will manage the inventory levels of distressed properties on the market in order to prevent more dramatic price deterioration.”

The average sales prices on properties in some stage of foreclosure decreased 23 percent from 2006 to 2009 while the average discounts on foreclosure purchases steadily increased from 21 percent in 2006 to 27 percent in the first quarter of 2010. Discounts on REOs are larger than discounts on pre-foreclosures. However, discounts on pre-foreclosures appear to be trending higher as short sales become more common.

Foreclosure sales increase 2,500 percent from 2005 to 2009 More than 1.2 million U.S. properties in some stage of foreclosure sold to third parties in 2009, an increase of 25 percent from 2008 and an increase of nearly 327 percent from 2007. Total foreclosure sales in 2009 were up more than 1,100 percent from 2006 and up more than 2,500 percent from 2005. Foreclosure sales accounted for 29 percent of all sales in 2009, up from 23 percent in 2008 and up from 6 percent in 2007.

Foreclosures carry 25 percent discount

The average sales price of properties that sold while in some stage of foreclosure in 2009 was 25 percent below the average sales price of properties not in the foreclosure process. That was up from an average discount of 22 percent in 2008 but down from an average discount of 26 percent in 2007. The average foreclosure discount in 2005 was 35 percent, driven by a nearly 50 percent discount on REOs; however, the discount on pre-foreclosures trended up slightly over the same five-year period, from nearly 12 percent in 2005 to 15 percent in 2008 and 2009.

National snapshot

A total of 144,503 bank-owned properties sold to third parties in the first quarter, down 13 percent from the previous quarter and down 27 percent from the first quarter of 2009. REO sales accounted for 19 percent of all sales in the first quarter, up from nearly 16 percent in the previous quarter but down from 21 percent of all sales in the first quarter of 2009. REOs sold for an average discount of 34 percent, up from an average discount of nearly 32 percent in both the previous quarter and the first quarter of 2009.

A total of 88,456 pre-foreclosure properties — in default or scheduled for auction — sold to third parties in the first quarter, down 15 percent from the previous quarter and down nearly 41 percent from the first quarter of 2009. Pre-foreclosure sales accounted for nearly 12 percent of all sales, up from nearly 10 percent in the previous quarter but down from 16 percent in the first quarter of 2009. Pre-foreclosures, which are often short sales, sold for an average discount of nearly 15 percent, up from nearly 14 percent in the previous quarter but down from 16 percent in the first quarter of 2009.

Nevada, California, Arizona hit hardest

Nevada, California, Arizona posted highest percentage of foreclosure sales in the first quarter, accounting for 64 percent of all sales in Nevada in the first quarter, the highest percentage of any state, although Nevada’s percentage was down from 65 percent of all sales in the previous quarter and 75 percent of all sales in the first quarter of 2009.

California posted the second highest percentage, with foreclosure sales accounting for 51 percent of all sales there in the first quarter — up slightly from 50 percent in the previous quarter but down from 70 percent of all sales in the first quarter of 2009. Foreclosure sales as a percentage of all sales were also down in Arizona from the first quarter of 2009, but the state still posted the third highest percentage in the first quarter, with foreclosure sales accounting for 50 percent of all sales.

Other states where foreclosure sales accounted for at least one-third of all sales were Massachusetts, Rhode Island, Florida, Michigan, Georgia, Illinois, Idaho and Oregon. Ohio, Kentucky, Illinois had the highest foreclosure discounts.

About John Rebchook

John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... (Read More)

Case-Shiller: Denver home values rise 6th consecutive month

Inside Real Estate News

Colorado's Real Estate News Source

Case-Shiller: Denver home values rise 6th consecutive month

Take a poll at the end of this blog and vote on whether you think this rising trend will continue.

Denver-area home prices rose an average of 4.4 percent in April from April 2009, marking the sixth consecutive month of year-over-year gains, shows the closely watched S&P Case-Shiller Home Price Indices released today.

The 4.4 percent gain was the largest since the trend began in November 2009, when prices were up 0.5% from November 2008. Each month, the percentage gain has grown.

Still, the 4.4 percent was only good for eighth place of the 20 metropolitan statistical areas tracked by Case-Shiller, as other markets, which previously had shown greater losses than Denver, are now enjoying greater percentage gains. San Francisco showed the biggest gain, rising a whopping 18 percent from April 2009.

Increases may continue

“I think the increases are sustainable,” said Gary Bauer, an independent broker who completes his own monthly report using Metrolist data.

The Denver market, as the nation as a whole, was helped in April as buyers and brokers scrambled to put homes under contract by April 30 to quality for a federal tax credit worth as much as $8,000.

“I think we are going to see much lower increases going forward,” Bauer said. “I do think the Denver market should get a lot of credit for six continuous months of year-over-year increases. But I do think the tax credits helped Denver and every other market in the country. I do think the trend is continuing, but at a much smaller proportion.” Qualified buyers who are seeking the tax credits have until the end of Wednesday to close on the homes.

May figures will be telling

But Tom Cryer, a broker withe the Kentwood Co. is not so sure how sustainable the entire home sales market remains in the wake of the end of the tax credits.

“I can tell you my first response is, “I can’t wait until we see the May figures,” Cryer said. “That will be the end of our six-month run. Absolutely. The front desk is all-knowing and all-seeing. We all have had fewer showings since April 30 and if you don’t have any showings, you don’t have any contracts.”

On the other hand, because Case-Shiller tracks appreciation, and not the number of sales, the end of the tax credits could bode well for Denver, he said. Case-Shiller uses “paired sales” of single-family homes to avoid the “price drift,” or the potential of bigger homes entering the market and skewing the data.

Low-priced homes no longer driving market force

“If you figure that the tax credits did not impact the move-up or move-down market very much, but primarily had an impact on the low-end of the price range, now, moving forward, those people at the lower-rung of the market, no longer have incentives to be part of the market,” Cryer said. “Could that mean that as we go forward, the bottom of the market has been taken away? Here is my updated prediction: The average price of a home cold go up, now that the bottom has been taken away, but the number of transactions will go down.”

Also, with fewer transactions, big sales will have a disproportionate impact on the overall numbers, he said. For example, a broker in his office recently put a home under contract for $2.8 million, which previously had been listed at $5 million.

“One $2.8 million sale makes up for a lot of $150,000 transactions,” Cryer said.

Case-Shiller doesn’t tell you what your home will fetch

Cryer said that while reports such as Case-Shiller “make for interesting conversations and I love to hear about and discuss this kind of stuff,” the truth is that it has little to do with what any individual can fetch for his or her home.

“Real estate is still a Main Street kind of business,” Cryer said. “Clearly, we have some blocks and enclaves in the Denver area that are just still performing very poorly. And we have other enclaves that are so hot you can drive through them and hardly see a For Sale sign. It’s all about “location, location, location,” while 60 days ago it was “timing, timing, timing,” when the the tax credits were still available.

Stephen Holben, a custom home builder, agrees with Cryer that real estate is very local

“As I have expressed before, (Case-Shiller) has nothing to do with the value of anybody’s property,” said Holben, principal of Holben Building Corp. “But it has been embraced as though it does, so what can you do? If it helps people function again, post on a billboard. I’ve been in this biz for almost 40 years, and I’ve never seen people behave as they are these days. We’re into year six of what I call The Great American Housing Beatdown.”

Monday, June 14, 2010, 10:05am MDT | Modified: Monday, June 14, 2010, 10:00pm

Denver-area luxury-home sales jump 62%

Denver Business Journal

Denver-area sales of homes priced at $1 million or more jumped 61.8 percent in May from a year earlier, according to Coldwell Banker Residential Brokerage's monthly report on high-end sales.

Fifty-five homes priced at $1 million or more sold in May in the metro area, up from 34 in May 2009, according to the brokerage, a leading local seller of luxury homes.

Median price of the luxury homes that sold in May was $1.28 million. The month's highest priced sale in the metro area was a four-bedroom, seven-bath, 8,000-square-foot home in Boulder that sold for $4.45 million.

Denver itself saw 18 million-dollar-or-more sales in May, while Boulder had 11, Castle Rock had five and Greenwood Village had four, according to the brokerage's monthly "Denver Metro Area Luxury Home Report."

Luxury homes that closed in May took an average of 122 days to sell, versus 131 in May 2009, the report said. And luxury-home sellers got an average of 93 percent of their asking price in May, up from 83 percent a year earlier.

"The increase in million-dollar sales in the Denver area is an encouraging sign that the mid- and upper-end of the local housing market continues to recover from last year’s sharp downturn," Chris Mygatt, president of Coldwell Banker Residential Brokerage in Colorado, said in a statement.

As with more modestly priced homes, the federal homebuyer tax credit deadline probably helped boost sales of luxury homes last month, Mygatt said. Buyers needed to be in contract by April 30, but have until June 30 to close escrow.

"The next few months will give us a good indication of how strong the housing market recovery will be without government stimulus," Mygatt said. "There are certainly strong headwinds facing the housing sector, including high unemployment, troubles in Europe with the debt market and the recent volatility in the stock market."

But he also said that with the U.S. economy improving, consumer confidence rising and mortgage rates at historic lows, “many buyers seem to be getting off the fence and jumping into the market."

The brokerage said it drew its report from Multiple Listing Service data of all homes sold for more than $1 million in the Denver area by all brokers.

denvernews@bizjournals.com

"Hard money" floats flips

"Hard money" floats flips

Despite high interest rates, short-term real estate investors lean on loans

By Tom LaRocque
Special to The Denver Post
Posted: 06/13/2010 01:00:00 AM MDT

Nathan Adams is pictured last week inside a north Denver fix-up he bought for $200,000. Adams uses hard- money financing, factoring in the finance costs "from the start." Investors say the capital fills a void where conventional banks are too cautious, too slow and generally not interested. (Karl Gehring, The Denver Post )

Eight to 10 times a month, an experienced real estate investor calls or walks into the Wheat Ridge office of Pine Financial hoping to borrow money and walks away with a check.

At least as often, inquiries come from newbie or wannabe investors pondering the purchase of a fix-up property. When they ask about rates, lender Kevin Amolsch recites the terms.

"We charge 15 percent annually plus four points up front," he said. A "point," some callers need to be told, is essentially a 1 percent fee. So on a $100,000 loan, they'll owe $104,000 before the rate clock even starts ticking.

"Some people are shocked," Amolsch said. With rates so much higher than any consumer bank, some may wonder if the terms are even legal.

"Hard money" lending is not only legal, it is thriving in the world of short-term real estate investment.

The term generally refers to high-interest loans due for repayment in a matter of months, not years. Pine Financial's standard promissory instrument is a nine-month note with interest-only payments due every month and a balloon payment at the end of the term.

The "cost of doing business"

A handful of local firms solicits new hard-money borrowers. Many individuals — mostly investors themselves — lend their personal funds. And some national firms do business here as well.

Hard money is the critical element that makes many deals possible, investors say. The capital fills a void where conventional banks are too cautious, too slow and generally not interested.

Nathan Adams bought a fix-and-flip home on Quivas Street last year. He paid $81,000 for the property and incurred about $5,450 in purchase costs, including four points on a loan from Pine Financial. He borrowed $108,000 and put $7,000 of his own money into the deal.

After $28,000 in repairs, Adams sold the property for $151,000. Holding costs and selling costs, including broker commissions, came to just over $10,000. In the end, his $7,000 cash investment yielded a 326 percent return of $22,867, even with about $8,000 in finance costs.

Hard-money financing is "just another cost of doing business," Adams said. "The key is to purchase it right and factor in your finance costs from the start."

Hard money is often called "equity based" or "collateral based" lending. Qualifying for a loan "depends almost entirely on the value of the property," said Paul Pedri, a partner in Investors Choice Funding, another local firm.

Pedri lends up to 70 percent of the expected value of the property after repairs. His firm is "far less concerned" than conventional lenders about the borrower's credit score, he said. "But we do still check for past bankruptcies and foreclosures."

Denver investor John Klahn has acquired five long-term rental properties using hard money. In each case, he subsequently refinanced with a conventional loan. He has used about 10 short-term fix-and-flip projects with hard money.

"I do it because it's quick and convenient, and I can usually close a purchase within two weeks," he said. "The interest rates don't matter to me because the loans are very short term."

Shrewd investors

Hard-money lenders are often savvy investors themselves. Amolsch, 31, has a military background and a finance degree. In college, he worked in a bank loan department and started investing in real estate. He now owns about 20 properties in Colorado and Tennessee, he said.

Successful investors tend to follow a "career path," according to Amolsch. They may start out by "wholesaling" homes, buying low and selling to other investors for modest profits. Then they learn to fix and flip properties.

From there, investors either become landlords, living off their own rental properties without so much hard work, or they go into some form of commercial real estate. Finally, he said, many smart investors become lenders themselves.