Tips for a first invest prop in co?

Question

I live in TX but have family in the area so am up in co a lot. I’m thinking about making my first investment property in Colorado. I wanted to see if anyone could provide me with any tips or advice for an initial investment property.

I’m working with about 100-125k should I try to find something smaller and simple and stay as close to possible as that as I can ie higher down payment?

Or should I find something a little more pricey but in a more desirable neighborhood?

Or Should I wait a few months before even looking and let the market keep cooling?

What are some things that you believe a first time investor should know or do when selecting a property in Colorado?

thanks!

Alexa Ferguson · Answer

Hey Eric! To get the best return on your money, I would recommend purchasing a short-term rental - these generate significantly more cash flow than long-term rentals. This could also be a great option for you since you spend a good amount of time in Colorado, so you can use it whenever you'd like rather than having a tenant occupying it constantly. As far as when to buy, it's tough to time the market perfectly since no one really knows what will happen in the future, as much as we try to predict it. Right now competition has dropped off significantly making it much easier to purchase a property, so if you are wanting to get started investing now is a good time. The rest of your questions depend on what part of Colorado you are interested in - are you thinking the Denver area, or somewhere in the mountains?

Ben Einspahr · Answer

@Eric W. You have started your search in the right place and have some excellent advice from some knowledgeable people. The Springs is an excellent place to invest, even from OOS. As you are well aware by now, if you are looking for your most lucrative investment, STR is the way to go. But yes, between down payment and furnishings your investment could easily exceed $125k depending on the size and location.

Depending on your timeline you next steps should be connecting with an investment friendly lender to get an idea what your buying power looks like. After that, I would find an investment friendly agent that is familiar with your desired location. BP is a great place to start.

I just finished a rough draft report with 6 different REI case studies for Denver, Springs, and Pueblo with the new higher interest rate environment. I'll shoot you a DM so you can take a look.

Best of luck!

Kevin Smith · Answer

@Eric W.You might be surprised how much income STRs can generate in this area.  An average monthly gross of $7k is definitely possible, and I'm thinking your mortgage would be under $3500.  The free account with Airdna gets you access to their "Rentalizer", so you can plug in an address and number of guests and see estimated revenue.Also, you may be able to get by without a PM since you mentioned having family in the area.  You can automate messaging, check-in, and coordination with cleaners.  In the event of something urgent, you could have a handyman or relative swing by.As for holding off on the purchase, as the market is cooling, and we're moving into the slow season, things are less competitive for buyers than they've been in a while.All that said, if you were really leaning towards a traditional rental, many investors have been buying in Pueblo.  With your budget, you should be able to find a small multi-family there.

Tony Xu · Answer

Hi Ben!I am also interested in investing in the Denver / Colorado Springs area and am wondering if you could send over those 6 different case studies to me as well! Thank you!

Jordan Malara · Answer

@Eric W. I certainly agree with what others have said! STRs are one of the best ways right now to purchase cash flow producing property in Colorado. Keep in mind though that these types of properties require additional cash/credit to start up. Startup costs include the acquisition down payment, any renovations needed to spruce up the property, and then design and furnishings. On average, we tell clients looking for STRs that they will need between $100k-$150k to get an STR up and running in CO Springs. I can say from experience that the cost can be worth it though. Typically we aim to find deals with a CoC return of between 15%-20%. The last point I'll make is that on the front range, the returns and therefore cash flow is seasonal. So most revenue is made in the summertime and the goal in the slow winter months is to at least match your mortgage and PM costs.

James Carlson · Answer

@Eric W.

I agree with Alexa above. It seems like if you want to invest in Colorado, and you also like to visit Colorado a lot, then a short-term rental or Airbnb property makes a lot of sense. You can get all the trappings of a real estate investment -- appreciation (hopefully), cash flow, mortgage paydown, tax benefits, etc. -- while also getting a place for you to stay when you visit.

When it comes to the money, you may not have a choice. First question I have is where would you be looking? There are still some second-home loans that only require 10% down, so maybe you'd qualify for that, but they're getting strict about those loans. If you buy it as a pure investment, then you'll have to put down 20% and almost anywhere in the Denver metro area, and most of the mountains and down in Colorado Springs, you're going to likely need to spend at least $500k to get anything decent for an STR, and 20% of that is the money you're talking about. So you likey don't have an option of going much above that anyway.

I wish you the best in your search. Colorado is such an awesome place to live. I've been here for 11 years and still feel grateful for the weather and the mountains. Cheers!

Michael Semcken · Answer

If you are looking to get a STR it is super important to make sure that you thoroughly research the laws regarding them by city.  For example, if you're looking to do an STR in Lakewood, CO they have made them illegal for now while they figure out a way to regulate STRs.  There are exceptions to the law, but it may not be worth your time jumping through hoops to make sure you're compliant.

Joshua Messinger · Answer

Hey @Eric W.!

I wouldn't ever recommend waiting for the market to cool down, but what I do recommend is setting up your system for buying properties up so you can buy in any type of market condition. 100K-$125K is a great start and you are ahead of a lot of other people though! I'm not sure how far that will take you in CO but I know in PA that would take you very far.

Based on the questions you had asked my best piece of advice to you would be to set up some simple goals and outline your vision of what you want from REI. Once you lay this out then you will be able to identify the type of path you want to take - for ex: the type of investment you want to make, how much you are putting down on them, etc.

I hope this helps and if you ever need anything don't hesitate to reach out!

-

Josh

Tips for a first invest prop in co?

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