Are considering an investment in the real estate market in Colorado? Real estate has long proven to be a sound area to invest in, providing investors with long-term gains when done right. As long as the right property in the right area is chosen, there’s no reason why you should not realize profits with a sound investment in the housing market.
Colorado is a desirable state that offers a high quality of life. So it makes sense that real estate investors would look to this state as a place to invest in for the purpose of making money and building wealth. Colorado’s economy is very healthy, which is always a good thing for real estate investors, and the natural beauty and city life makes the state even more of a target for investors.
But like any other investment, it’s essential to do your homework before investing your hard-earned capital in anything, including real estate. When investing in Colorado rental properties – whether it’s in Colorado Springs, Denver, Boulder, or Aurora – choosing the right location can make all the difference. Here are some factors to consider before investing in CO real estate.
Future Development
Before you buy a property in a particular area, look into whether or not there is any future development slated to take place. While certain types of development may be good for a neighborhood or city – such as new infrastructure (as long as it’s not abutting your property) – other types of development may be bad for business.
Ideally, there should be signs that the area is growing and up-and-coming. Anything that will improve the livability of the area and increase the value of properties is a good thing for you as a real estate investor in Colorado.
Vacancy Rates
As a real estate investor and landlord, the last thing you want to see is a high rate of vacancy in the city you plan to invest in. If your method of real estate investing involves buying a rental property and renting it out to tenants, you ideally want to make sure that you can find a good tenant who will stick around for the long haul.
A high rate of turnover is not a good thing for any investor. This can waste a lot of time, effort, and money marketing their places for rent, screening prospective renters and getting your units ready for occupancy. What you want to see is a relatively low number of listings.
This is also good for competition. If there aren’t as many places available for rent, there will be less for tenants to choose from. In this case, you may have more negotiating power and may also be able to fill your unit quickly without having to compete much with other investors.
Just keep in mind that there may be seasonal cycles taking place, which could skew the numbers.
Property Taxes
There are plenty of expenses related to owning property in Colorado, and that includes property taxes. Ideally, the property tax rate in the area you are buying in will not be too high. Expenses like these can creep up on you and eat into your profits. Before you buy, make sure you fully understand what the property taxes are like for the property you wish to purchase and see if you can find out if there are any increases in the world in the near future.
Having said that, high property taxes may also mean that the area is desirable and in high demand. If that’s the case, your property can be considered of high value and may also see value appreciation over the short- and long-term, which is obviously a good thing. Just make sure all your expenses work out with your revenues so that you still profit handsomely after all is said and done.
High Average Rent
The way that you will make a profit on your investment rental property is by charging a rent amount that will more than cover your expenses and leave you with sufficient funds after all is deducted. As such, you want to make sure that the going rent in the city you are looking to buy in is high enough. Otherwise, you could find yourself in the red every month.
You may want to charge a certain rent amount for your unit, but if the surrounding neighborhood does not command such a price, you could be out of luck. Instead, look at the average rent price for a unit that you are planning to buy to gauge what you can realistically charge.
Consider the rent price relative to the price you pay for the property and the operating expenses. For instance, a $1,200 rent might not sound much for a $500,000 property, but it should be plenty for a property worth $250,000.
So, where are the best places to invest in rental property in Colorado in 2020?
Best Cities in CO to Buy an Investment Properties
There are a number of great places in Colorado to invest in real estate. Here are some examples of cities in CO that you may want to think about investing in this year:
- Median home price: $494,900
- The expected increase in price over the next year: 3.6%
- Average rent: $2,176
Including the city of Denver on this list might sound obvious, but there are plenty of reasons why it should be a consideration for real estate investors. For starters, landlords can expect to bring in an average rent of $2,176, which is a rather healthy amount given the average price tag of a home in Denver today.
According to the U.S. News, Denver is currently ranked #2 in the entire country for the best places to live. The city boasts a strong labor force and economy, and there are plenty of things to do in the city, And given the fact that Denver is located at the base of the Rocky Mountains, it offers plenty for the outdoor enthusiast to stay occupied.
Zillow also predicts price appreciation to pick up over the next year, with an anticipated 3.6% increase in prices over the next 12 months, giving investors the chance to get in the market soon to take advantage of property value increases that are coming.
- Median home price: $316,300
- Expected increase in price over the next year: 5.0%
- Average rent: $1,697
Another city high on the list of most desirable cities in the country to live is Colorado Springs, which ranks 3rd overall. Quieter than Denver but just as beautiful, Colorado Springs is seeing its real estate market heat up right now. The average home price has spiked 6.3% over the past year and is expected to climb another 5% over the next 12 months.
Considering the relatively affordable price tag of homes right now in Colorado Springs and the projected short-term appreciation, investors can easily rent out their properties with a healthy average rent of nearly $1,700 and sell for a handsome profit in the not-so-distant future.
- Median home price: $793,500
- Expected increase in price over the next year: 3.8%
- Average rent: $2,685
The average home price in Boulder is certainly a lot higher than both Denver and Colorado Springs, but the high average rent can make up for the difference. With rents averaging just under $2,700, investors should have no trouble covering their expenses.
Boulder has dozens of colleges within relatively close proximity of its borders, making it a great place for college kids to live close to school and giving investors a lot of rent demand in the area. Boulder’s overall quality of living is also very high and is a desirable place for folks to call home.
The market in Boulder is neutral right now, with home prices having increased a modest 2.5% over the past 12 months and expected to climb another 3.8% over the next year. So investors will have the benefit of some appreciation in the coming months.
- Median home price: $370,200
- Expected increase in price over the next year: 4.4%
- Average rent: $1,836
A fast-growing city in the west, New Castle is a city in Colorado that real estate investors may want to have on their radars. It’s already an attractive place for tourists thanks to its outdoor activities and offerings. Investors may even want to entertain the idea of offering short-term vacation rentals as part of their overall investment strategy in New Castle.
The average rent in New Castle is also quite high given the relatively low average home price. With a rent of over $1,600, covering the costs of a home worth $370,000 shouldn’t be too difficult. The market is also healthy right now, with homes expected to increase in price by 4.4% over the next 12 months after having already increased 3.1% over the past year.
- Median home price: $405,700
- Expected increase in price over the next year: 3.7%
- Average rent: $1,819
Close to Colorado Springs is Manitou Springs, another possible spot for real estate investors to park their capital in Colorado. This mountain town is quaint and picturesque thanks to its historic buildings, boutique shops, water-side eateries, and art galleries. Lots of people flock to this town to soak in what Mother Nature has to offer.
Right now, the real estate market in Manitou Springs is bustling. Property values have increased 2.6% over the past year and are expected to climb 3.7 over the next year. Numbers like these show that today may be a great time to invest in Manitou Springs as prices are anticipated to rise. And the high rent prices can be an attractive lure for investors given the relative housing affordability.
Ready to Apply For a Mortgage in Colorado?
If you want to buy property in Colorado for investment purposes, a mortgage will likely be needed to help you finance this expensive purchase. If so, Sammamish Mortgage is here to help. We are a family-owned Mortgage Company that provides borrowers in Washington, Oregon, Idaho, and Colorado with many mortgage programs with flexible qualification criteria. Get in touch with Sammamish Mortgage today!
