Colorado Springs Real Estate Investing Podcast

The December 2022 market stats are now out for Colorado, which gives us a great picture of how the year went. In the end, the Denver market grew slightly, while the Colorado Springs market ended negative for year over year growth. While rising interest rates caused many buyers and sellers to put their plans on hold, we’re optimistic that the market will rebound in 2023.

Check out the podcast or YouTube video to hear the full conversation with Envision Advisors agents Jenny Bayless and Preston Newberry, Cornerstone Home Lending Loan Officer Bill Rodriguez, and me. We talked about stats, creative deals we’re seeing, and and our predictions for the future.

Note: The above Executive Summary is from Lon Welsh of Your Castle Real Estate.

Cornerstone is teaming up with area developers to provide buyers with low interest rates when they build a home with them. Check out the information below and reach out to Bill Rodriguez with any questions.

If you’re interested in buying an investment property and want to know what’s on the market now, sign up for our weekly deals list email.

House hacking is a great way to build your rental portfolio while cutting down on living expenses.  Investors Greg and Heather are back to tell us how they decided to house hack in Colorado Springs with a detached ADU they’re renting out as an Airbnb. Thanks to this Airbnb, they’re able to build their rental portfolio much faster than expected.

Greg and Heather first started investing in real estate while living out of the country.  Since returning to Colorado Springs, they bought six units in one year, plus a couple of out of state properties. 

At the time they were looking to buy, competition was fierce and there were many competing offers on properties.  Since they were using a VA loan, Greg and Heather had it even rougher.  During this period, many sellers weren’t entertaining VA offers, likely due to lack of education or being afraid of the appraisal process. 

They found a great house with a cottage in the backyard, and agent Leah Keeling built a good rapport with the agent.  Unfortunately, it went under contract to someone else.  When the deal fell through, however, the agent reached out to see if Greg and Heather were still interested.

This is a house with a cottage located near downtown Colorado Springs built in the 1900s.  They had the option to live in either property, but since the cottage is the newer and nicer of the two buildings, they opted to live in the main house. 

They renovated the main house with a balance between choosing nicer finishes for while they live here and knowing their ultimate plan of converting it into a long-term rental. 

The inspection itself went well, but they found out after the fact that there were raccoons in the attic and beetles in a backyard tree.  They brought in pest control to take care of everything.  

Greg and Heather originally planned on renting out the cottage on a long-term basis, but it made more sense financially to set it up as a short-term rental. The increased revenue from the Airbnb will allow them to build their portfolio faster than a long-term rental.

Short term rental regulations in Colorado Springs are stringent for non-owner occupants but much more flexible for owner-occupants.  Having this option allows them to get a bigger boost to their cash flow while living there.

Since they live on the property, they decided to self-manage it.  They purchased all of the furnishings, made the listing, and do most of the cleaning. 

Guests like that the Airbnb is in a walkable area close to downtown and Garden of the Gods.  Heather leaves snacks and lip balms as a personal touch to make the guests feel welcome.  Since they live so close by, it’s easy for them to do small things to make the stay better, such as lending their toaster when their guests wanted one. 

Heather learned the importance of taking her personal feelings out of the property, especially when it comes to reviews.  While they’ve only had two negative reviews, they stung at first. 

The property cost $540K, and their interest rate is 3.75%.  Thanks to the VA loan, they put 0% down and only had to pay for closing costs and the furnishing/start-up costs for converting the cottage into a short-term rental. 

Their monthly costs break down to:

Estimated Total Monthly Costs: $2,038

During the summer, they had almost 100% occupancy.  Bookings slowed down during fall, though every weekend was booked.  They were making a profit during the busy season and have about half of their costs covered during the winter. 

Their short-term rental income annualizes at $2,981, giving them a yearly cash flow of $943. 

This property is a great addition to Greg and Heather’s rental portfolio and the Airbnb will allow them to build their overall portfolio faster.  Due to Greg’s job, they know they’ll have to move in the next two to three years, so they plan on staying in the property until then. 

If you want to find your own rental property in Colorado Springs or Pueblo, reach out to us.  We’ll help you clarify your strategy and goals to find a property that will help you achieve them.

Between high interest rates and an uncertain economy, many investors are in wait and see mode these days.  If you’re like them, you’re waiting until next spring to see how the market looks before buying another property.  But just because you’re not buying right now doesn’t mean you can’t make moves to improve your portfolio. 

Here are 5 actions you can take now to optimize and recalibrate your portfolio so you’re prepared for your next transaction. 

Now is a good time to make sure you have enough funds in your reserves and that you calculated them correctly.  It’s common to realize after owning a property for a while that what you initially calculated isn’t accurate. 

While we like to hope for the best, we also plan for the worst.  This ensures you’ll have enough cash on hand for your next investment without any unplanned expenditures for a property you already own. 

Do a credit check now to make sure you don’t have any surprises on your credit report.  Thanks to the Fair Credit Reporting Act, the federal government mandates that everyone is entitled to an annual credit check without any penalties to their credit score.  Go to AnnualCreditReport.com to get a free copy of your credit report. 

Doing this now gives you the chance to clear up any mistakes or pay a bill you weren’t aware of.  This also allows you to improve your debt-to-income ratio, which will make you more attractive to lenders. 

Taking care of your credit before you’re ready to buy helps ensure the next transaction will go smoothly.

When people are looking for ways to improve their monthly costs, they often just focus on their mortgage interest rate.  However, if you bought a property in the past few years, chances are you won’t be able to find a better rate in today’s environment.

Instead, look at all of the things you pay for every month and see where you can reduce expenses.  Call your insurance agent and have them run a cost comparison on different policies (making sure the coverage is adequate, of course).  Check how much you’re spending on trash removal and see if you can save a few dollars with another service—small amounts add up over time.  You can even check with your CPA about a cost segregation study to save you a non-cash expense. 

Another angle to evaluate are current market rents.  Landlords often forget to raise rents or simply don’t pay attention to rental trends.  If your rent is severely under market, you might want to look into ways to increase the rate closer to local trends. 

When you’re not in acquisition mode, you have the time to look at your properties and see how you can improve them.  Do you have carpet you could replace with LVP flooring?  Consider the durability of your repairs and how they’ll reduce costs in the future. 

Make these repairs and improvements now, so you aren’t dealing with them while you’re in the middle of purchasing a property in the future.

If you have a tenant turnover coming up, evaluate your property and see if you have the ability to add value to it.  Maybe you have a basement rec room that could be converted into a bedroom.  Look for anything in your current property that could add extra income separately from just raising rent. 

It’s also important to pay attention to shifts in consumer preferences.  What are the things people are looking for now?  After covid, everyone realized how important it is to have space.  With so many people working from home, having an extra room for an office is in high demand. 

Having an in-demand rental property will boost your returns and can improve your portfolio drastically.

These simple tips will not only improve your portfolio, they’ll put you in a better position to buy your next investment property.

If you need help figuring out your next move, reach out to us.  We can show you how to analyze your properties with our Property Llama software, and help you understand how to use the information to optimize your portfolio.  

The November 2022 Colorado market stats are out, and we’re breaking down the data and analyzing the trends.  It looks like seasonality is finally back in both Denver and Colorado Springs, with month over month sales and inventory down but higher than this time last year.   It’s still a seller’s market, but buyers have the ability to ask for concessions that would have been unheard of in the past couple of years.

A lot of people are waiting to see what the market and interest rates will do over the next couple of months.  This means it’s a great time to optimize your portfolio in non-transactional ways to be ready to act next year.

To hear the full discussion with Envision Advisors agents Jenny Bayless, Preston Newberry, and me, listen to the podcast or watch the YouTube video. 

Note: The above Executive Summary is from Lon Welsh of Your Castle Real Estate.

If you’re interested in buying an investment property and want to know what’s on the market now, sign up for our weekly deals list email.

Investors Greg and Heather joined me to discuss a fourplex investor-friendly agent Leah Keeling recently helped them purchase.  They’re taking a unique approach to renting it out by listing two of the units as short term rentals and the other two as medium term.  

We talked about how they decided on these strategies, and how they renovated the units.

The clients are Greg and Heather, based out of Colorado Springs. Greg was on a previous episode of Ask an Investor where he sought advice on how to buy a multifamily property in a competitive market.

At the time, he was stationed overseas with the military. Now, he and his wife are back in the Springs and ready to get serious about reaching their investing goals.

This is a fourplex located in the Woodman/Academy area in northern Colorado Springs.

The fourplex was built in the 1980s and features 2 bedroom/1 bathroom units.  While the building is in good shape structurally, the units need some cosmetic updates. 

This property was under contract, but the buyer backed out.  Leah inquired about why the deal fell through and found out it was due to inspection issues.  Greg and Heather weren’t deterred and wanted to put in an offer.

Surprisingly, no major issues were found during the inspection. 

They purchased the property for $780K with an interest rate of 6.875%.  Renovations to the first unit cost just over $23K, and they plan to follow the same model for the next 3 units.

One unit was vacant when they closed, and they anticipated two more units would be vacant within 30-60 days, while the last unit would become vacant in about 8 months.  This would allow them to stagger renovations on a unit by unit basis. 

In reality, two of the tenants broke their lease early, so they suddenly had 3 vacant units to get up and running as quickly as possible.

Heather took the lead on renovating the first unit, using a contractor Leah recommended.  She spent a lot of time finding deals on appliances and furniture, helping the renovation come in just under their $25K budget.

She recommends building relationships with local vendors, as well as finding deals at Goodwill and other discount stores.

Short term rental licenses in Colorado Springs are hard to come by as the rules are very strict.  Properties can be rented out on a short term basis only if they are zoned appropriately and there isn’t another short term rental within 500 feet. 

After closing on the fourplex, they checked to see if any other nearby properties had short term rental licenses.  While there are some medium term rentals (which don’t have the same requirements), none were short term rentals.  

They snagged a rental license and now have the option to list any of the units as short term rentals.

They plan on renting two units as short term rentals while renting the other two on a medium term basis.  Their estimated monthly income is:

Estimated Total Income: $12,800

They just started renting the first unit as a short term rental and are using local property management company Hostē to list the unit and oversee the day to day details.  Hostē offers PM services for both short and medium term rentals, so they plan on using them for all of the units. 

Heather and Greg are in the process of renovating two of the units and hope to get them listed as soon as possible.  They know they’re going into the slower winter season and are adjusting their expectations accordingly. 

The great thing about combining short and long term rental strategies is they have options to experiment and see what works best over the long term.  I’m excited to see how their fourplex performs once all of the units are renovated and having them back on the show for updates. 

Are you interested in finding your own investment property in the Springs?  Schedule for your free investment consultation and we’ll help you figure out your goals and find a property that will help you achieve them.

This deal analysis looks at a duplex in Pueblo.  Leah helped the first-time investors based out of Denver wanted to take advantage of the lower price points in Pueblo to find a multifamily property.  This is a great duplex cash flows even in a high interest rate environment.  Thanks to their decision to self-manage, they’re getting great returns.

These first-time investors are a couple who live in Denver.  After looking at single family homes and townhouses, they decided to look for a multifamily property. 

This is a duplex with 3 bedroom/1 bathroom units, each about 800-900 sq ft.  It’s located in the south Pueblo area, just south of Bessemer, a popular area for our clients that’s very close to I-25.

The front and back duplex has a unique layout, with the first unit being ranch style and the second having two stories.  Three bedrooms is rare for a duplex and will help the clients get better rents. 

The property was recently renovated, and they did a great job with the update. 

This deal was on the MLS.  Leah knew it would be popular, so they put in an offer the first weekend it went on the market.

The property was listed at $299K, but the listing agent told Leah that there was another offer on the table that was under list.  This was an easy decision—they offered at list price and quickly went under contract.

The inspection found quite a few issues, so Leah advised her clients to submit a rather large inspection objection to see if the sellers would negotiate.  Thanks to the shifting market, the sellers agreed to everything they objected to. 

Some of the issues included inadequate insulation, live knob and tube electrical wires in the attic, and radon.  The seller took care of the electric and insulation work, and gave the buyers $5600 in concessions along with a slight price reduction to assist with correcting the other issues.

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

The interest rate is a whopping 7.25%, which the clients were lucky to lock in before the next rate hike.  Thanks to the seller concessions, they were able to buy down some points. 

While they expect $1250 in rent per unit, Leah and I ran the numbers conservatively at $1200. 

The clients are self-managing to save money.  Since they live in Denver, it’s a bit of a drive, but they’re excited to be hands-on landlords and learn more as investors.  Leah gave them the phone numbers of reliable handymen in the area to make it easier for them. 

They are going to institute a utility bill back to the tenants so they won’t need to worry about utilities.

Even with a 7.25% interest rate, the yearly cash flow for the property is $3400, and the cap rate is 7.2%.  These numbers are helped because the clients are choosing to self-manage, and they were able to save a significant amount of money thanks to the inspection objection. 

To see what the property will look like if the clients choose to get property management, we ran the numbers again. 

Even with the 10% management fee, the property breaks even for cash flow and the cap rate is still 6.2%.  While we can’t predict the future, it’s possible they could eventually refinance into a lower rate and see the same returns using property management that they’re seeing right now. 

This deal shows that even with high interest rates, investors can still find properties with strong returns.  It’s important to look at all of the factors that go into a deal, not just rates. 

My philosophy is that if the numbers of a property work today, then there’s a high probability of long term success regardless of what happens in the market (assuming you budget for contingencies as well!)

If you want to find your own property in Pueblo or Colorado Springs, reach out to us for a free investment consultation.  We’ll be happy to run some numbers and find the right property for your goals.

How are high interest rates affecting returns? Our deal analysis today looks at a single family home in Pueblo recently purchased as a long term rental. The buyers were able to get a loan of 5.625%, so I ran the analysis using the current interest rate at the time of recording–6.5%. 

Rates have gone up since, but this is a great example of the opportunities Pueblo has to offer.

These clients are a young couple who currently live in the Denver area.  They house hack their primary residence and wanted to expand their rental portfolio while saving up for their next home.  Their plan is to replicate this strategy every one to two years while acquiring supplemental rental properties.

They worked with investor friendly agent Leah Keeling, our residential Pueblo expert.

This is a 2 bedroom/1 bathroom single family home located in the southwest part of the city.  Although it was built in 1900, it’s been recently remodeled.

The clients started looking at properties last spring, when the market was very hot.  They had to be competitive with their offer in order to land the property.

The home was listed at $149K, and they came in at $155K with limited inspection objection.  That meant they would only object to items that cost $1500 or more.

The inspection went well, and they didn’t end up objecting to anything.  Because the home was remodeled, they only found minor items they would fix on their own.

I used the Rental Property Spreadsheet to run the numbers on this property.

You may notice the initial repair cost of $3K, even though the inspection didn’t find anything major.  Unfortunately, after the clients closed on the property, they found a leak between the meter and the house that cost $2500 to fix.  These things happen sometimes, which is why reserves are so important.

The extra $500 is to repair railings on the front and back porches.

The clients are using a property manager since they live in Denver and wanted a property they could set and forget. 

They are getting an annual cash flow of $1246 with a cap rate of almost 6%.  This fits the bill for many investors who aim to get $100 per month in cash flow. 

If we run the numbers with today’s 6.5% interest rate, we can see that it’s still a good deal.  The cap rate stays the same, though the cash flow drops to $459.  Having a cash flow positive property with such a high interest rate is impressive. 

This is a great long term investment and shows that Pueblo has solid opportunities even in today’s economy.  There’s a good chance rents will rise in this area, and there’s always an option to refinance into a lower rate down the road. 

If you’re interested in investing in Pueblo or Colorado Springs, reach out to me for a free investment consultation. 

The September 2022 market stats are out. In Denver, inventory and sales prices are up while closed units are down. Despite the increase in inventory, we’re only halfway to a balanced market.  There were 4100 closed transactions in September, which is 1500 fewer than this time last year.  However, the overall average is between 4000-6000, so the Denver metro area is right where it should be for this time of the year and we’re starting to see seasonality again.

Meanwhile, Colorado Springs saw month over month home prices and sales drop slightly.  While the percentages may look dramatic, keep in mind that the base numbers are so small that any slight fluctuation will have a greater percentage impact.

While we don’t have stats for Pueblo, we have reason to believe that the area is withstanding the high interest rates.  Investor friendly realtor Leah Keeling recently helped a client purchase a duplex there with 25% down and a 7.25% interest rate. The property still cash flows $300 per month.

To hear the full discussion with Envision Advisors agents Jenny Bayless and Preston Newberry, lenders Joe Massey of Castle & Cooke Mortgage, and Travis Sperr of Renovo Financial, and me, listen to the podcast or watch the YouTube video.

Note: The above Executive Summary is from Lon Welsh of Your Castle Real Estate.

If you have questions about your strategy in a shifting market or want help investing in rental properties, reach out to us.  We want to help you navigate the market to find the right strategy to achieve your goals.