Is Colorado's Multifamily Market Still a Good Bet for New Investors?

[Meghan Begue]

Hey BP Community!

I'm currently on the hunt for my first investment property in Colorado, and I wanted to share my experience and hear from anyone who's been navigating the same market. Initially, my goal was to secure a multifamily property using my VA loan for leverage, focusing on long-term rentals. The idea was to find a property, 4-plex, that would allow me to break even, cover the mortgage, and hold onto it as a long-term investment.

However, analyzing the data and really coming to terms with Colorado's market, I’m rethinking my approach. While long-term rentals are still an option, I’m noticing that many investors are shifting towards STRs to boost their net profit.

Here’s where I stand:

• VA Loan for leverage: I've found some great properties that could allow me to house-hack or set up a traditional rental. The loan has been a game-changer, minimizing the upfront costs. The $0 down payment, while convenient, also does not set up a great profit margin in the beginning. I am also considering the "assumable" VA loan option to lock in a lower interest rate.
• Initial Plan: Use the property as a long-term rental, aiming for cash flow neutrality or slight positive cash flow. The idea was to lower my monthly mortgage payment to reinvest the difference into future projects. But with the rising costs, breaking even seems less ideal, and I’m questioning if it's the best strategy in this market.
• Current Consideration: After digging into the numbers, I'm seriously considering going the STR route instead. In certain Colorado markets, especially near popular tourist spots or cities like Colorado Springs & Old Colorado City, STRs have the potential to bring in higher monthly revenue, even if they require more management. Another idea is to use a STR/LT hybrid setup within the 4-plex.

Question for the community:

• For anyone who has made the switch from long-term rentals to short-term in Colorado, what has your experience been?
• Is the higher cash flow from short-term rentals worth the additional effort, or does it come with too much hassle in terms of turnover and regulations?
• Any tips for finding that sweet spot between profitability and sustainability?
• Should I consider moving out of Colorado (LOL)?

Looking forward to hearing your thoughts! I'm excited about making this investment work but want to explore all options to make the best decision. Thanks in advance!