Colorado Springs Real Estate Investing Podcast

In this Deal Analysis, Chris and I look at a fourplex in Colorado Springs that was recently purchased by Denver investors.  This is a great example of an off-market fourplex that will generate solid returns. 

These clients are investors from Denver looking to take advantage of the lower price points in the Springs.  Leah helped them close on a different property a few months earlier. Once they got that property up and running, they were ready to make the leap to a multi family unit. 

This was an off-market fourplex that I found by speaking with a listing agent.  The buyers I was working with didn’t want the property that was on the market, so I asked the agent if he had anything else. He told me about this property, and I realized it fit exactly what Leah’s clients were looking for. 

This fourplex consists of 2 bed/1 bath up/down units. All of the units are in good condition and the property is in a desirable part of town.

The seller wanted $695K for the property, and the clients agreed.  This was an easy transaction for both sides—the seller got the price he wanted and the clients didn’t have to compete with hundreds of other buyers.  

The clients asked for a 45-day close because they were doing a Home Equity Line of Credit (HELOC) and needed that cash to fund the purchase.  The seller agreed since he wasn’t in a hurry and just wanted to hit his price point. 

Overall, the property was in good shape, except for the electrical panels.  The main and four subpanels were all Federal Pacific Stab-Lok panels.  These electrical panels have been discontinued because they are a health hazard.  They don’t trip when they need to, which causes fires. 

The seller’s viewpoint was that they haven’t been an issue yet, so he didn’t want to replace them.  I always tell buyers that these types of panels aren’t an issue until they’re a big issue, so I recommend replacing them.  The buyers had a good long-term point of view chose to replace the panels so they wouldn’t have to worry about them later. 

I used the Rental Property Analysis spreadsheet to run the numbers on this fourplex.

The current makeup of rents is $975 for 2 units and $1039 for the other 2 units.  In the current market, they could easily get$1100 to $1150 per unit, so the buyers have significant upside. 

As the leases turn over the next 12 months, they can steadily move toward that number. It may take a couple of lease turns for the lower priced units to get to that level.

All utilities are billed back to the tenants at 100%, so the only costs for the clients come from trash and landscaping. 

Currently, their cash flow is just over $4K a year, with a 4.7% cap rate and overall return of 20%. 

If we run the numbers at $1150 per unit, their cashflow increases to nearly $10K a year and puts the fourplex at a mid-5% cap rate:

As you underwrite properties, it’s important to understand that there is a range of outcomes.  I recommend underwriting both a conservative and optimistic estimate to see all of the possibilities.  In reality, you will probably fall somewhere within that range.

The clients are very happy with this property, and it’s right in line with what they wanted.  With the way real estate is trending in the Springs, they are expecting significant appreciation.  They are taking the long view on this property and are happy to be patient and let the market do its thing. 

If you’re interested in finding your own investment property or shifting your investment game plan, reach out to me.  I’m happy to help you figure out the best move and find a property that fits your goals. 

In this episode of Ask an Investor, Envision Advisor’s House Hacking Specialist Ben Einspahr joined us to talk about how to plan for his next House Hack.  We went over the properties he currently owns and his options for funding the next house. 

Ben is an active house hacker in the Denver area.  A couple of months ago, he left his W2 to join Envision Advisors full-time, which changes his funding options. 

Currently, Ben owns 3 properties with 4 doors.  The first property is an out of state home in Omaha, NE.  He bought the house in late 2016 and thanks to appreciation, he now has about $85K in equity.  From a cashflow standpoint, the property loses money because of some big CapEx repairs and under-market rent.  However, he has great tenants that have been there for years and are easy to work with. 

In April 2019, he purchased a property in Arvada, CO that started as a house hack.  He currently rents out the main house on a 24-month lease and does a medium-term lease for traveling nurses for the mother-in-law suite over the garage.  For more details on this house, check out our House Hack Ride Along episode.  That house has about $175K in equity. 

His current primary residence is a new build townhome in Wheat Ridge.  There is an income suite on the first level that he rents out as an Airbnb.  He’s seeing great equity in that property, too, thanks to current market conditions.  We talked with Ben about transitioning into this new property a few months ago. 

In total, he’s sitting on about $300K in equity and has $1K a month in cash flow.  Due to his career transition, Ben wants to be conservative with his estimates. 

Ben wants to take some time to get established in his new, non-W2 job.  In about 2 years, he wants to purchase House Hack #3.  Once he buys the new property, he plans to live in it for at least two years.  In 5 to 6 years, he wants to think about purchasing House Hack #4. 

While it’s difficult to create a plan this far in advance, it’s good to get an idea of how he’ll approach his next property.  Ben has a few different options for funding and isn’t sure which one is best.

Chris says: If you have properties, I’m a big fan of using equity.  Equity is untapped money in your real estate piggy bank.  I would rather use that than cash to buy a property.  With cash, there of downsides of the opportunity cost and loss of liquidity. 

We’ve talked before about how returns start to drop as your equity grows because everything starts to compress.  To keep your returns high, you need to keep making your equity work for you.  Since you’re sitting on so much equity, use that first. 

Chris says: You could do a cash out refinance, but then you’d probably lose your low interest rate.  You could open a Home Equity Line of Credit (HELOC) to pull out money, even though it’s an investment property. 

I looked at HELOCs earlier this year and found that a lot of banks won’t do one on an investment property.  The best quote I could get was 70% Loan to Value (LTV).  The cash out refi was 75% LTV but it resets the payments.

Jenny says: Investment property HELOCs typically don’t have as beneficial a LTV as your primary home.  It’s definitely worth tapping into if you have a really good loan on the property and would lose those benefits with a cash out refi. 

Ben was one of the first buyers in his current neighborhood, so he’s got a lot equity in his current home. 

Chris says: Again, you could do a cash out refi or a HELOC.  For a primary residence HELOC, you can get up to 95% LTV.  That would mean more leverage, but the interest rate would be in the high-3% range, versus 5% for an investment property. 

Chris says: HELOCs have different rules; there’s no one year residency requirement.  You can tell them it’s your primary residence, get money and put it in a checking account, then use that money as a down payment on your next home. 

Talk to the lender about doing a loan on a new house.  When you pull money out, it raises your debt-to-income ratio, which could impact qualifying for a loan.  Make sure the lender knows what you’re doing and helps you line it all up. 

Remember that since you’re planning on doing this in a few years, the market will be different than it is right now.  In today’s environment, these are your best options, but that could change. 

Chris says: I could make the case that it makes the most sense to sell House Hack #1 depending on appreciation and current performance. 

Jenny says: If you have $175K in equity, you could take that money and 1031 it into a fourplex in Colorado Springs.  Now, the 2 doors you currently have will turn into a 4-door investment property.  Keep in mind that you don’t need to go from house hack to house hack only. 

Chris: No, you’re good at house hacking and that allows you to acquire properties with a very low down payment and reduce your living expenses.  But as your properties appreciate, you’re sitting on a lot of equity. 

If you have half a million dollars in equity in your portfolio, you’re at the point that you’re not positioning yourself well.  You should shift your mindset and think about bigger properties. 

Jenny says: You put 5% down on your house hack and now you have a $600K asset.  That’s pretty amazing. 

Chris says: It’s out of state, and there’s nothing wrong with selling it.  Sometimes, you just want to sell the dog in your portfolio.  I would look into doing a 1031 on that property.  Make sure the timeline works and the tenants are gone.  You’ll want to sell it in good condition and vacant in order to get top dollar. 

Jenny says:  You could combine the equity from selling two properties into a multi family unit in the Springs, but it’s very difficult to time it correctly. 

Chris says: You have to identify the new property within 45 days of closing, which means they need to sell at the same time.  The more properties involved, the more complicated it gets.  If one sale falls apart, what do you do?

Jenny says: A reverse 1031 can be cost prohibitive.  It depends on how much gain you’re working with.  A Qualified Intermediary (QI) works with you to facilitate the exchange.  You cannot touch the sales proceeds, so it sits in their bank account.  You pay them for this service, and they can help you figure out if it’s worth doing ahead of time.

Chris says: In general, it costs about five times more to do a reverse 1031.  You have to figure out how you’re going to purchase the next property without money from a sale, and it’s hard to get a loan for that much.  Some QIs have connections, or you can talk to hard money lenders.  There are options out there, but few people do it because it’s so complicated. 

Jenny says: There are loan options worth exploring even though they have less favorable terms.  Non-qualified mortgage, or non-QM, loans are based off of asset performance and allow you to lock into prices now that will only rise later.  It’s worth considering with the intent to refinance as you get more established with your career. 

Chris says: These loans often have a 5-7% interest rate with an ARM at 3-7 years.  Most people refinance before that time, but it does make sense to take out a higher interest rate loan and refinance before the ARM when you have a better lending profile. 

There is a risk that interest rates could rise dramatically, though.  I wouldn’t do it personally, but it is an option. 

A Roth IRA is a retirement account that allows you to withdraw your principal without early termination fees or taxes.  If you put in $5K a year over a period of 5 years, you could theoretically have $25K in principal and $10K in earnings.  You are able to withdraw that $25K without it counting as income. 

Chris says: I have mixed emotions about that.  You could take out, say, $50K of principal and put that in real estate where you’re getting a better return. 

However, you’re getting about 10-15% return with your Roth IRA, which is a good return that isn’t leveraged.  You’re putting money into a vehicle that can compound tax free.  You pay the taxes on it when you’re younger and presumably in a lower tax bracket.  It’s hard for me to recommend pulling it out knowing you’ve got tax-free compounding returns for life. 

You could make the case that if you keep doing a 1031 forever—assuming there are no rule changes—you can also avoid taxes. 

Jenny says: I’m very torn on this subject.  Emotionally, it feels wrong to pull out money from a retirement account.  But mathematically, I can’t help but think it’s a good idea. 

If you assume the average stock market return is 10%, you are earning 10% on $50K that would compound annually.  If you leverage that into a real estate asset, you now have a $200K asset that will compound by appreciation alone, not to mention the other benefits of cashflow, depreciation, and debt paydown.  I’m curious what it would look like if you constantly re-leverage. 

Chris says: I’ve run these models before, and they are way better than the stock market because you stay in the 20-30% returns range most of the time.  This works if you sell and trade up every 3-5 years.  In real estate, you aren’t automatically reinvesting like you can do with stock market dividends.  You have to take the cashflow and reinvest it, which is difficult to do at $200 a month. 

With equity, you have to reinvest to keep the high returns.  Otherwise, at year 10 or 15, as your real estate becomes less leveraged, your returns are similar to the stock market.  You lose a lot of benefits once your returns become more compressed. 

Chris says: You’re right that the spreadsheet says to repurpose the Roth IRA, assuming you’re constantly reinvesting it every 3-5 years. 

But take a step back: you currently have 2 sources of capital—your Roth IRA and the equity in your properties.  Getting money from your equity has fewer opportunity costs.  Once you take money out of your Roth IRA, you can’t put it back.  I lean toward using equity first because there are fewer tax consequences. 

Another reason to keep the IRA is liquidity.  Equity isn’t liquid.  If you keep the money in the retirement account, you have cash you can pull out if you lose your job or something catastrophic happens.  Equity is great until you can’t use it; if something happens and a lender won’t let you pull it out, what then?

Jenny says: Ben, you do have a traditional IRA, as well.  You can use that as a last resort for emergency funds, but then you have to pay taxes and penalties.  There’s a 10% penalty and taxes on the money, but it’s there if you really needed it.

I think it’s a fascinating concept.  There really is a thing in our brains that tells us not to take money out of a retirement account. 

The great part about real estate is that there’s a straightforward mathematical aspect to it, but there’s a lot of personal preference, too.  This discussion shows that there are a lot of valid approaches to the same problem and none of them are necessarily wrong. 

If you have any questions or scenarios you’d like to talk through, reach out to us.  We love to discuss strategies and figure out the right move for you. 

The Colorado Springs MLS trends data for November 2021 are now out.  The active inventory went down 27% compared to the previous month, which is a staggering drop.  In some ways, it’s starting to feel like the Spring of 2021 again with buyers routinely outbid by $40K-50K. 

A lot of buyers are anticipating interest rates going up and are trying to buy a property before that happens.  This is a good strategy because the low interest rates allow buyers to lock in cheap 30-year debt and hedge against inflation.

As seen in the charts below, it was an incredibly strong month for Colorado Springs.

For information on how to start investing in Colorado Springs, check out our free 2021 Colorado Springs Real Estate Investing Guide.

We don’t often talk about condos in Colorado Springs, but they can be a rewarding asset class, especially for first time investors.  This deal analysis looks at a condo I recently closed with a client that is poised to perform very well for them.

My clients are first-time investors who are very cognizant of having the proper amount for reserves and not overextending themselves.  They had a strict budget of $230K or less, which in the Springs means we were only looking at condos. 

This is a two bed/two bath condo located in the Southgate area.  The area is near the South Nevada corridor, which is getting a lot of updates.  This location is very central and will attract a wide variety of tenants. 

With a condo at this size and price point, we would usually expect only one bathroom.  The fact that it has two is a great bonus for tenants and increases the rental value. 

The condo was listed at $218.5K and, believe it or not, we actually got it for that price.  I don’t know the last time we were able to lock up a property at list, so this was really exciting. 

The inspection went pretty well, which we expected for a condo built in the 1980s.  The only substantial issue we objected to was the Federal Pacific Stab-Lok electrical panel.  The seller was unwilling to replace the panel, but they agreed to give the buyer a credit so they could replace it themselves before renting out the property. 

The credit was for $3K, which is about what it will cost to replace it.  Replacement for this panel has gone up in the past couple of months because there are some recent code changes by which electricians have to abide.  It used to be about $2K. 

We’ve talked about this type of electrical panel before.  I tell all of my buyers to replace these panels because they are known not to trip, which causes them to overload and create a safety hazard.

I used the Rental Property spreadsheet to analyze this home.

Underwriting rents for this condo was a little difficult because it was hard to find exact comps.  Conservatively, we’re estimating $1400 a month, but I wouldn’t be surprised if they are able to get $1450, or even $1500.  It’s a very nice unit with an updated, modern kitchen and located in a desirable area.

The HOA for the condo is $250 a month, which includes water usage for the whole development.  We were unable to locate the water heater during inspection and then found out that the condo association owns all of the water heaters.  This is great for owners because it means that if a water heater breaks, it’s not their responsibility to fix or replace it. 

Even if this isn’t the best performer we’ve seen in the Springs, these are solid returns.  Right now, townhomes at a higher price point are the sweet spot, but this is a great first deal for these buyers. 

The location, cashflow, and condition of the property are the perfect example of a good first investment property.  My clients are very happy with their condo, and it’s a positive start to their investment journey. 

Even though inventory is tight, there are still great deals to be found.  This condo shows that being flexible on the type of property you are willing to buy can yield excellent results. 

If you’re interested in starting your own investment journey, reach out to us.  We love to talk about the market and figure out which asset class will best meet your goals.

In this episode of Ask an Investor, Kevin Main talks to Chris and Jenny about how to take his investment strategy to the next level.  Kevin has previously been on an episode of House Hack Master Minds.  Now that he’s closed on his second house hack, he wants to know how to scale up and where to find the best deal on a pure investment property. 

Note: We ran this post (with all the details and notes) under the Denver channel originally, but it has so much great content we’re sharing it on our Colorado Springs channel, too!

As short-term rentals grow more popular and widespread, it makes sense that they’re becoming more professionalized, too.  One such professional management company is Hostē.  Located in Colorado Springs, they manage over 160 properties in the Springs and surrounding areas.

I recently sat down with Craig Kallian, business development manager, to talk about what services Hostē offers clients, more information on the short-term rental climate in the Springs, and what advice he has for investors looking to get into this market. 

Hostē started in 2017 with a focus on room rentals.  From there, it shifted to managing entire properties as short-term rentals.  Due to the impact of Covid in 2020, they pivoted to medium-term rentals.  Now that they’ve developed that model, they’re starting to take on properties specifically for medium-term rentals, too.  They learned to keep an open mindset and adapt to fluctuations and changes in the market.

One thing that sets Hostē is apart is the organizational structure.  Everyone in the company understands their role and specializes in that area.  Craig started off doing long-term rentals and burned himself out over the next five years.  Now that he focuses on getting homeowners set up for their short-term properties, he sees how much easier it is to thrive when he’s in a role that fits him more directly.

First, Hostē provides the property owners with a checklist of items to include in the home.  These items range from silverware and pillows to safety devices, like a fire extinguisher.  They show owners like-listings and aid them in setup, as well as connecting them to companies that provide useful services. 

Their $1200 startup fee covers: filing permitting on behalf of the property owner, a deep clean, installing a smart lock on the door, providing items like soap dispensers, and doing a safety inspection (and providing safety equipment if necessary).  They also build out an FAQ for the property that guests can reference.  With their partner, Feed Media, they do marketing for the home.  This marketing includes interior and exterior photography, as well as drone photography.

After the two week startup period, the property goes live and is blasted out to 250 different sites. 

I recently came across a fourplex with 1 bed/1 bath units that would be great to use as a short-term rental.  I sent this information over to Craig and asked him what clients should expect.  Before walking the property, he first finds like-properties and pulls data from 3rd party sources to understand what the competition looks like.

For this property, he recommended charging $114 a night and ran occupancy at 74%, or about 270 days full a year.  For each unit, including the 22% management fee, the owners would get a net income of 24.1%.

The rules for owner-occupied short-term rentals remain fairly flexible. At the end of 2019, however, Colorado Springs released some of the most restrictive short-term rental rules we’ve seen in Colorado for non-owner occupied properties.  The restrictions include requirements that eligible properties are zoned R2 and above.  Properties that meet the zoning requirement are then subject to a density test to ensure that the property is not within 500 feet of another short-term rental.   

Craig says that Hostē focuses on pocket areas within the Springs that have fewer restrictions.  They keep their finger on the pulse of new ordinances to ensure that their clients are able to operate within the legal bounds of their area.

Certain cities require business licenses, but there’s no permitting in the majority of them.  This makes it a little bit easier to set up properties.  Craig encourages anyone interested in short-term rentals to look into the regulations in their area or talk to a property manager before taking any action.  He’s had conversations with homeowners who didn’t find out until after they purchased a property that the zoning or HOA prohibited short-term rentals. 

Always check with a property management company or call the local planning department before making any decisions about buying a property with the purpose of using it as a short-term rental.

Generally speaking, clients can typically make 2-3 times more than long-term rentals, though there are a lot more moving parts with short-term.  If you are able to get a permit within the city of Colorado Springs, you will likely see that level of return. 

Craig recently pulled some data on 2 bed vs 4 bed properties to see how they compare.  He found that for short-term rentals, 4 bed properties bring in higher returns because those are usually sought out for larger groups and gatherings. 

For medium-term rentals, the sweet spot is 1 to 3 beds because those are usually rented by solo travelers. Usually, these guests are traveling nurses, people attending corporate events, or military personnel.  They don’t need a lot of bedrooms, usually just one for themselves and a work station or guest room. 

The answer to this depends on your perspective.  Craig likens it to leaving a salaried job for one based on commission.  You know exactly what you’re making every week with a salary, whereas with a commission, there are highs and lows. 

It’s a big change to go from long-term rentals to short-term, and not knowing what the market will bear can bring some anxiety.  While he’s seen investors who are apprehensive initially, he’s never seen anyone switch back to long-term. 

A common concern that comes up is the seasonality of the market.  In Colorado, June-August are the most popular travel times, and owners will often see their property booked 100% during this period.  Once they move into the slow season, owners get worried when they see their property is booked less often. 

In Colorado Springs specifically, May through August are when we see the most visitors.  The Springs broke travel industry records in 2021.  The area is a popular destination these days as it’s a big, spread-out city and there is a ton to do outdoors. 

With normal seasonality, February and April are the least busy months.  February tends to be very cold, and April is usually the lull between spring break travel and summer vacations. 

Hostē coaches clients on what to expect during the slower season and to plan their financials accordingly.  They also have tips on how to offset this dip, such as how to stand out from other listings (insider tip: hot tubs will boost the nightly rate quite a bit).  This awareness upfront prevents future disappointment. 

With the disclaimer that this is his opinion and not investment advice, Craig says that the best thing property owners can do is be patient with it.  People are excited at the beginning thinking of how much money can make, but there’s more to it than that.  First, make sure you have the right property; there are ways to make an older property shine, but it requires time and patience. 

If you’re buying a property for investment purposes, plan to put in more than you expect.  There are always issues or higher than anticipated costs.  Plan for the unexpected and take your time. 

Seek out as much data as you can find to make a smart, informed decision.  Use available 3rd party data sources to get an idea of what you need to do.  Short-term rentals are becoming more professional, so make sure you’re up on the latest trends and prepared to do the extra work.  If you’re getting into this industry, be willing to innovate, change things, and adjust to the market. 

Remember that travel trends are fluid.  The Springs is a desirable market, but sometimes we can’t predict what will happen.  Nobody foresaw the effect that Covid would have in 2020, or that Colorado Springs travel would break records the next year.

For prospective clients of Hostē, Craig says property owners need to be willing to let them manage the property. If a property owner is insistent on visiting their property, for example, it will affect how they can manage it.  Sometimes they need to move guests from one property to another, and if an owner as at the home or doing something to it, then they have to place the guests elsewhere. 

If someone needs to make a certain amount of money or it will sink their property, short-term rentals might not be the right move for them.  This ties back to seasonality—there is fluidity in seasonality and owners aren’t always going to make the same amount of money every month. 

These are preliminary conversations that Hostē has clients to make sure it’s the right fit for them.

If you want to learn more about short-term rentals, STR Intel is a weekly podcast from Hostē.  It is available on all major podcasting platforms.  You can also email Craig directly at [email protected] or visit https://iamhoste.com/.

Are you interested in buying your own investment property?  Reach out to me and I’ll be happy to help you form a strategy and find the right property for you.

The Colorado Springs MLS trends data for October 2021 is now out, and this month is a repeat of the majority of the rest of this year. Home sale averages are up a little bit, with the median home price at $446K. The median appreciation is 16.3%, which is down a little bit compared to this time last year when it was in the 20s. However, 16% is still an extremely high appreciation rate. New listings dropped a little bit from last month; this stat is surprising given that we’ve had to be less competitive with our offers.

For anyone interested in investing in the Springs, patience and persistence are the best approach. Some investors may be disappointed with the lack of inventory, but on the flip side, competition is less aggressive.

Much like Denver, the market is doing really well for sellers in Colorado Springs.

Usually, seasonality would lead you to see a small reduction in activity.  Instead, the Colorado Springs market saw a small increase.  The market continues to be stronger than you’d historically expect.

Colorado Springs may soon be home to a 25-story residential tower–the tallest building in the city’s history. This is a pretty significant proposal that would signify a start to changing the city’s skyline. The current record-holder is only slightly shorter, but any time developers are competing to have the tallest building, it’s a sign that the city has a lot of growth ahead of it.

For information on how to get started investing in Colorado Springs, check out our free 2021 Colorado Springs Real Estate Investing Guide.

I recently talked with Sara Blackhurst and Brian McCain, Action 22’s CEO and COO, about Pueblo, CO and why it’s a great place to invest.  While Action 22 focuses on southern Colorado generally, they are very active in Pueblo. 

Action 22 is a member-driven organization that serves 22 counties in southern Colorado.  Their work focuses on the intersection of local government affairs, economic development, natural resources, health, and education.  Their goal is to influence some of the policy decisions made by local governments so that all members of the community prosper. 

Brian says that Pueblo is on the cusp of becoming something bigger and greater; it’s never been where it’s at now in recent history.  He encourages people to take some time and see the beauty that is Pueblo, a city rich in culture and community, from the Riverwalk to the reservoir. 

Sara says she hears this all the time.  Many people don’t realize that there’s a nice downtown area that’s in the process of being built up.  She encourages people to go to the city and explore the Riverwalk and downtown.  You’ll find something you wouldn’t expect. 

Pueblo has every opportunity available and when you look at it on paper, it’s hard to understand why it hasn’t exploded yet.  The best thing an investor can do is get involved in the community in a hurry. 

Unlike many areas in Colorado, Pueblo has an abundance of water.  Currently, there are about 170K people in the county, but it has enough water for a population of just under half a million.  This makes Pueblo a great place for new builds. 

In fact, new builds are so popular in this area that builders and construction crews can’t keep up with the demand.  Most new development is sold within a day or two of going to market.  Being in such a great position on water is a main factor. 

The local government in Pueblo is doing everything they can to bring in more investors because there’s currently a housing shortage.  One of the ideas in the works is a vacant property tax for both residential and commercial properties.  At one time, 7% of all housing in Pueblo was vacant.  The city created a vacant house registry and the police department started fining property owners whose houses were in disrepair. This tax would benefit investors, since property owners who don’t want to pay the tax will look to sell their properties. 

Pueblo is transitioning to become the most business-friendly town in the state.  The government is cutting red tape and creating up a one-stop shop for setting up a business.  Instead of having to go to different entities for permits and approvals, business owners can get everything they need all at once.  They’re also in the process of shifting everything online so you can start your business in Pueblo from anywhere in the world.

Pueblo has PEDCO, Pueblo Economic Development Corp., which is funded by a continually renewed half cent sales tax.  It helps set up businesses and incentivizes them for staying in the area for a certain number of years and hiring a specific amount of local residents.  PEDCO offers tax incentives for buying property and helps pay for it

The city is also offering incentives to energy companies.  Pueblo is in a constant fight when it comes to energy, and the nearby power plant employs many local people.  When that plant shuts down, employees could lose their jobs, which offers a huge workforce for another company. 

Traditionally, Pueblo focused on industrial entities, such as aerospace, AC manufacturing, and a cement plant.  There has been a lot of recent interest from aerospace and technological industries because the infrastructure is already in place and there’s plenty of land available to build on. 

While bringing in manufacturing is still a priority, there’s a larger focus toward small businesses, too.  There are a lot of empty buildings downtown and they want to attract mom-and-pop businesses, such as art galleries and tourist attractions.  Pueblo recently got its first cheese shop downtown!

There’s a lot of spillover because Pueblo is nearby and has the infrastructure to support these businesses.  The chemical depot is closing down in the next 5 years, which is generating a lot of interest from aerospace companies.  The set up of the land and facilities perfectly supports that type of business. 

Energy development would be further along if not for the housing shortage.  There is simply not enough workforce housing.  While Pueblo is generally an affordable place to live, it’s more expensive than it used to be. 

Watertower Place is a great example of a successful revitalization project.  It’s a historic building that was originally the first meat packing plant west of the Mississippi.  It survived a big flood 100 years ago and has a lot of great history.  The owner acquired the building 3 years ago, and now it’s a facility that promotes a great culture of collaboration, prosperity and positive thinking.

The Holmes Hardware building is under development, and they plan on having it up and running within 3 years.  It will have a food hall on the first floor as a restaurant incubator and affordable apartments above it.  These developers are breaking the mold for how to get things done. 

Brian says that compared to the rest of the state, Pueblo is probably your best bet right now.  It’s on the cusp of becoming something larger and special, which won’t happen without investors.  Get ahead now before it’s too late.  He says to look at the developers around Colorado Springs who are moving from there to Pueblo. 

Sara reminds people that you can’t wait until you feel 100% comfortable or you’ll miss the opportunity.  The way you succeed as an investor is to take a calculated risk.

Sara and Brian host a podcast about Pueblo called Making Action Happen, which is available on all major podcasting platforms. 

You can learn more about Action 22 here or reach out to them at directly at [email protected].  

If you want to learn more about investing in Pueblo, reach out to us.  We’re currently helping investors purchase properties down there and are expanding down there next year. 

In this deal analysis, Leah and I analyze a property she closed on a few weeks ago with an out of state investor.  He has a great system in place for a non-owner occupied room by room rental model. This model brings great returns and provides a nice place to live for his tenants. 

This client is an experienced investor who lives out of state.  Like one of our other clients, he has a couple of other properties in Colorado Springs in which he uses the room by room model.  He knew exactly what he was looking for and didn’t want to compromise on his strategy. 

Even though it’s a competitive market, he was adamant about not paying more than he thought the property was worth. This meant he was willing to be patient and wait for the right property at the right price to become available.

He was looking for a house with a lot of square footage, including a basement with open space.  In addition, he wanted at least 3 bathrooms and wouldn’t consider a property that had anything less.  Because of the number of tenants who will be renting the property, he also wanted ample parking. 

The property is a tri-level style house that is in great shape.  It had four bedrooms, and the client converted some space in the basement to create to a 5th bedroom.  There are 3.5 baths, which ensures plenty of privacy for the tenants.  There’s also a large dining space, along with two different living areas, ensuring that tenants won’t feel cramped or on top of each other.

The tri-level style is Leah’s favorite for room by room rentals because the staggered layout of the house usually means at least two living areas and more space for tenants to spread out.  Many tri-levels have a basement rec room in addition to a family room on the main level. 

The house was listed at $395K, and they offered $403K.  Although the client had a cap at $400K, he was willing to offer a little more because the great condition of the property meant less money toward repairs and maintenance.

All of the major components had been recently replaced, including the furnace, AC, and water heater.  The floor was also brand new.  The only issue that came up during inspection was that the roof was in need of repair, but the sellers replaced it within two weeks.  Since the sellers knew that any buyer would object to such a big issue, it made sense for them to take care of it right away.

We used the Real Estate Investing Spreadsheet to run the numbers.  

The 3.375% interest rate on an investment property is very low, and it will go a long way toward boosting the client’s returns over time.   

Though the property was in great shape, the client spent about $5K converting the basement space into a bedroom and other small changes to make the home ready for multiple tenants.  In room by room rentals, it’s important to ensure that each room has a lock and that the common areas are in good shape.

While the client doesn’t have property management, he does pay a local assistant to take care of on-site tasks, such as showing the house to potential tenants or giving access to anyone who needs to make a repair. 

The insurance for this type of rental strategy falls under a typical landlord policy.  The rate isn’t as good as homeowners insurance, but the price point is lower than short-term rentals.

Each room will rent for $650 a month.  The house also has a garage with 2 separate doors, so the client has the option of renting out garage space to 2 of the tenants, as well.  He hasn’t decided how much to charge yet, but that will boost his returns once he has it figured out.  Altogether, the total monthly rent is $3250, which is a great rate for a single-family home. 

As rents are rising at historic rates, it’s great that this tenant is giving people the opportunity to live in a really nice home for $650 a month.  There’s not enough housing in the Springs, so giving 5 people a house they can live in at that rate is a win-win for both the tenants and the investor. 

The annual cashflow will be just over $10K a year, which is an incredible amount for a property in this area.  His cash-on-cash return is 11%, exceeding the 10% that many people aim for.  We advise our clients that 10% is typically unheard of in the Springs, but these returns show that a more unique renting model makes it possible. 

 A lot of audience members get excited when they hear about this type of rental model, and it’s worth exploring if you have the right temperament for it.  Leah asked this client how he deals with the interpersonal issues of his tenants, and he says that if tenants have issues or are causing problems, they are welcome to leave.  His no-nonsense approach keeps him from getting stressed out by small issues. 

The returns this client is getting on the property are great, but it took a lot of time and effort to make it happen.  The client was willing to wait as long as it took to find the exact property that fit his model and price point.  They fell out of contract on the first property they submitted an offer for, but he and Leah stuck with each other and eventually found this great home.  It’s important for people to know that in this type of market, clients aren’t always going to win their first offer. Finding the right property can be a journey, but this deal shows that having some patience can pay off. 

If you’re interested in learning more about the room by room rental strategy as a non-owner-occupant, send me an email and I can show you what other clients are doing in this space.   We can set up an appointment, and I’ll help you figure out an investment strategy to help you achieve your goals.

In this episode, Leah joined me to talk about a townhome purchased by a first-time investor.  She helped him figure out what to look for and was able to get him under contract on the first property they saw.  Even with conservative projections, the client is getting great returns thanks to his choice to self-manage the property. 

This client is a brand-new investor out of Denver who was looking for a property that would cashflow.  To help him understand what to look for, Leah and I ran through different analyses on properties beforehand using our Rental Property Spreadsheet. 

This is a 3 bedroom/2 bathroom townhome located in central Colorado Springs.  It’s in a great neighborhood that backs up to a golf course. 

The property was listed at $230K, and Leah submitted an offer for the buyer for $250K.  It’s hard to find anything in the $200s right now, and properties in that price point are highly competitive.  The client was competing against 5 other offers, but, fortunately, his was strongest. 

The inspection found that the foundation needed to be encapsulated.  Leah was able to negotiate $1K in seller credits toward the $3200 repair cost.  Otherwise, the property was well-maintained and in good shape.

We ran rent conservatively at $1650, but the client might push it a little.  Similar properties run at $1750.

To save money, he is going to self-manage.  Self-managing is a great learning experience for anyone so inclined, and this is a solid property to start with because it’s in good shape and the HOA handles some of the maintenance.    

The client’s goal was to cashflow about $200 a month, which he’ll be able hit with an annual cashflow of $3K.  His cap rate of 5.6% and 36.5% return on his initial investment are great numbers, especially for a traditional investor who isn’t house hacking.  By self-managing the property, he’s helping to boost his returns. 

This deal analysis really highlights the benefit of self-managing.  By choosing to do the work himself, the client’s returns are significantly higher than they would be otherwise.  As an investor who also self-managers her properties, I recommend anyone who has the ability and interest to look into it. 

If you have any questions about investing in the Springs, or want some help finding your own property, send me an email.  We are more than happy to help you house hunt for your own investment property.