Colorado Springs Market Condition Discussion and Recomendations

[Brandon Guite]

Hello all and I hope '18 is off to a great start for everyone!  I have been researching the Colorado Springs Market over the last few weeks and have been intrigued thus far and wanted to get other experienced investors thoughts. There are some key things I have found through research that make the area seem like it could be a strong potential for opportunity.

• A low and still declining Unemployment Rate of 2.7%, right on par with the state average
• Job Growth projected at 38% Annually over the next 10 years
• average rent price increase of 10-12% over 2017
• A diverse economy with college, tech, military and healthcare services.

Prices in the area are still reasonable, especially when comparing to the Denver area markets. Anyone here actively investing in the area? Am I missing anything in my market analysis thus far that I should be aware of? Next step is checking the area out and meeting with lenders, brokers, and property management groups in the area to begin building a network and better understand the market but wanted some local experience as well.

Anyone have any recommendations for Lenders, Brokers or Property Management groups in the area?

Thanks everyone!

[Jenny Bayless]

@Brandon Guite I was pretty excited to see that someone had started a 2018 Colorado Springs market discussion, so thank you for doing that!

Personally, I am pretty excited to see what what 2018 holds for Colorado Springs.  We have been investing in CO Springs since September 2016, and have since acquired 7 buy and holds there.  We are hoping to buy about 3-5 more in the next year or so. In that short amount of time of owning the properties, we have been extremely pleased with the performance of the properties.

I think something to keep in mind, is that it is easy to overpay for a house in order to outbid other investors (or homeowners), or overpaying based on the assumption that home prices and rents will keep rising.  There have been multiple instances where I was outbid at a price that I thought was absolutely crazy, and sure enough, 3 months down the road if that investor flipped it, they sold it for a price that I would have thought was nuts when I put the offer in 3 months prior.  I guess it worked out for them, but I wouldn't buy with that strategy personally.

I think if you stick to your numbers (what you want for cash on cash, return on equity, etc), and stick to what the values presently are, you should be okay!

Here are a few very anecdotal personal observations: 

*Please note that there may or may not be larger market data that support/contradict these statements, and I am stating this only based on my extremely small sample size compared with the entire population, so please take that with a grain of salt  :)

• For our preferred price point, it seems that sale prices are generally outpacing rent increases. What I mean by this, is a 3 bed 1 bath SFH in the Central CO Springs area that would generally be offered on the market in early 2017 at $150,000 and rent for $1200/mo last year, is now selling for $170,000 this year and maybe $1300/mo in rent. For us, it is getting harder and harder to find cash flowing deals, and my assumption is that the price increase is being driven by both higher demand and lower supply.
• Speaking specifically about our small sample of SFHs, we have seen (on average) FMV appreciation greater than 15% in our first year of ownership. I personally don't expect to see that level of growth consistently for future years, but it certainly is nice for the time being! We don't account for this in our calculations as I mentioned previously.
• We get multiple rental applications for vacant properties within a matter of days.  When showing homes, I like to talk with potential tenants to get a feel for what they are seeing in the rental market from their optic. They all pretty much have told me the same thing: there is simply not enough affordable and nice rental housing available.