Buying real estate in Colorado is about more than just finding a place to call home. It has become increasingly popular for people to own multiple properties, one of which serves as their primary residence, while the others are used to generate rental income and / or profits through price appreciation or house flipping. Our capable real estate professionals help you navigate the intricacies of investment real estate by:
- Helping you understand your options for investing in Colorado real estate: rental properties, house flipping, vacation homes.
- Walking with you step-by-step through the homebuying and / or selling process.
- Answering questions and keeping you informed about relevant market updates.
- Conducting a comparable sales assessment to give you a clearer understanding of factors to consider as you make your investment decisions.
- Researching and previewing homes on your behalf to highlight ones that meet your requirements and eliminate those that don’t.
- Simplifying house-hunting by scheduling showings and providing you with transportation to appointments as necessary.
- Introducing you to our network of partners including reliable inspectors who can thoroughly examine properties you’re considering and and mortgage brokers who can help you with financing options.
- Supporting you after the sale with our network of reliable local contractors who can help with home improvement projects both large and small.
- Helping you find professional property managers who can help you manage your properties and your tenants.
Basic Rental Properties
This buy-and-hold investment is as old as the practice of landownership. A person will buy a property and rent it out to a tenant. The owner, the landlord, is responsible for paying the mortgage, taxes and costs of maintaining the property.
Rewards: The landlord charges enough rent to cover all of the aforementioned costs and produce a monthly profit until the mortgage has been paid, at which time the majority of the rent becomes profit. If the property may also have appreciated in value over the course of the mortgage, leaving the landlord with a more valuable asset. According to the U.S. Census Bureau, real estate has consistently increased in value from 1940 to 2006, then proceeded to dip and rebound from 2008 to 2010.
Risks: As with any investment, there are, of course, risks that you need to manage. First among those is finding the right property at the right price and location. You need pick an area where vacancy rates are low and choose a place where people will want to rent. Second, bad tenants or, worse still, no tenants at all, could leave you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments. You need a contingency plan and a cash reserve for covering potential gaps in rental income.
Vacation Rental Properties
Colorado is one of the most popular U.S. vacation destinations in all seasons. Whether you dream of a mountain home for ski season, or a cabin just steps away from rivers filled with trout, a second home in Colorado provides respite and escape from everyday life. Vacation rental property investors make their money by buying reasonably priced properties in popular locations and adding value by renovating them. This can be a longer-term investment depending on the extent of the improvements.
Rewards: Profit is generated either through vacation rental income, price appreciation that occurs as a result of a hot location (Breckenridge, Vail, Winter Park or other popular ski destinations) and / or from renovations and capital improvements that increase the property’s overall value. These properties have the added value of being available for personal use and indulgence when they are not being rented. Online services, such as VRBO and AirBnB, that simplify marketing and property management have made this a highly desirable real estate investment.
Risks: The limiting feature of this investment is that it is time intensive and often only allows investors to take on one property at a time. Investors also face the risk of price depreciation (decrease in property value) in bad housing markets. You need pick an area where vacancy rates are low and choose a place where people will want to rent or you could be scrambling to cover your mortgage payments.
Real Estate Trading (House Flipping)
Real estate traders buy Colorado properties with the intention of holding them for a short period of time, often no more than three to four months, whereupon they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or are in a very hot market.
Rewards: Profit is generated either through the price appreciation that occurs as a result of a hot housing market or from renovations and capital improvements that increase the property’s overall value. Some property flippers buy undervalued properties, such as foreclosures or short sales, and then update the property to increase its overall value. Others will not put any money into a house for improvements; the investment has to have intrinsic value to turn a profit without alteration or they won’t consider it. Flipping in this manner is a short-term cash investment.
Risks: Investors face the risk of price depreciation (decrease in property value) in bad housing markets. If a property flipper can’t unload a property, it can be devastating, because these investors generally don’t keep enough ready cash to pay the mortgage for the long term. This can lead to continued losses for house flippers who are unable to offload the property in a bad market.
Room Rentals In An Occupied Home (e.g AirBnb)
Airbnb help people list, find, and rent lodging. With more than 1,500,000 listings in 34,000 cities and 190 countries, this online marketplace connects users with properties to rent with users looking to rent space. Available spaces vary widely and range from individual rooms inside occupied homes to entire homes and apartments, castles, boats, manors, tree houses, tipis, igloos, private islands and other properties.
Users are categorized as “Hosts” and “Guests,” both of whom must register and create personal online profiles before using the sites. In addition to providing personal information, hosts display listing details including price, amenities, house rules, imagery, and detailed information about their neighborhood.
Rewards: Profit is generated through rental income of empty rooms or out buildings such as garage apartments – frequently while hosts occupy the property. This additional source of income can be used to cover all or a portion of the hosts rent or mortgage payments.
Risks: Investors face the risk of property damage and any other thing you can imagine with strangers staying in your home while you are there. Due to the nature of the business, users of the site must register and create a personal online profile before using the site. A merit system is in place to allow guests and hosts to leave references,and ratings which are displayed to the public in order to provide an evaluation method. Hosts have 100% control over who books their place. When a potential guest puts in a reservation request, the host has 24 hours to accept or decline the request at their sole discretion. Every property is associated with a host whose profile includes recommendations by other users, reviews by previous guests, and a private messaging system. The Airbnb Host Guarantee property protection program covers property loss or damage due to vandalism and / or theft.