Buying an investment property in Colorado can be a lucrative option for growing future wealth.
The Centennial State offers many potentially lucrative locations for a rental property, such as Fort Collins, Colorado Springs, Denver, and Aspen, to name a few, so it’s important to consider each area carefully.
Success in any real estate venture hinges on buying the right property at the right price in the right location—i.e., an area where the home values will rise. It also depends on getting the right financing deal.
Is real estate in Colorado a good investment?
Buying real estate in Colorado is generally considered a good investment opportunity.
Rental properties in Colorado can generate continuous passive income while also being profitable long-term investments thanks to rising home values.
In the Denver area alone, the average home price increased more than $52,000, a jump of over 8% year over year from November 2022.
Before deciding to buy an investment property, however, it’s important to put in the time and effort to learn about the different housing markets in Colorado. Making the right choice for your specific situation is the best way to reach your real estate and investment targets.
Let’s look at a few main dos and don’ts of buying an investment property in Colorado.
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Dos and don’ts of buying investment properties
A reliable income stream is every investor’s goal, but owning an investment property means more than picking the right location and covering the mortgage, down payment, and closing costs.
For example, if you aren’t using a property management company, you’ll need to consider your landlord’s role. That means understanding the reality of difficult tenants, missed or late rental payments, property repairs, and more.
Partnering with a property management provider can eliminate many of these headaches while freeing up time in your schedule.
The best way to position your investment for success is to be well-informed and always partner with professionals who have your best interest in mind.
Do take advantage of tax deductions
One of the advantages of real estate investing is that the IRS allows property owners to deduct a portion of the interest they pay on their mortgage, property taxes, and property insurance against rental income, lowering their before-tax income.
In short, you pay less tax.
And if you have losses, you can apply these deductions against other income. The IRS also allows deductions for depreciation, i.e., wear and tear on the property.
Do consider a variety of property types
Not all investment properties are suited to all housing markets.
For example, a studio unit in a multi-family building might be hard to rent if you’re considering an area catering mostly to young or growing families.
However, the same unit near skiing or universities, like Colorado Springs or Denver, could be ideal.
Partnering with a local real estate professional can help you gain insight into which properties would thrive in various neighborhoods.
The right agent can also help you identify up-and-coming areas allowing you to buy before home prices climb. Rising home values mean a quicker return on your initial investment.
Don’t skip careful evaluation of your return on investment
If you’re considering a Colorado investment property, “running the numbers” is a must. It’s easy to get caught up in the emotion of buying a property, and that’s why understanding your investment’s “big picture” is crucial.
Careful evaluation will help you decide whether this really is the right property for your investment portfolio. Real estate investments take time.
Knowing how—and when—you’ll begin generating a return on your initial investment can help you find the best rental property for your situation.
Don’t forget to budget for the additional financial expenditures
Unexpected weather-related repairs can follow sudden storms, vacancies can happen during peak rental periods, and even the best-managed properties can experience water leaks or broken hardware.
New real estate investors will benefit from having funds set aside to handle unforeseen costs that can crop up without warning.
Is it still worth buying an investment property in Colorado?
While there are no guarantees in life or real estate, there are several reasons why many investors continue to choose rental properties in Colorado to diversify their portfolios.
- Rental properties allow investors access to a steady, stable passive income stream after rents are collected and operational expenses deducted;
- Colorado real estate offers long-term appreciation potential, with median home prices continuing to increase despite rising mortgage rates and pandemic restrictions;
- Real estate is an investment asset that has the potential to hedge inflation when home values and rental prices increase faster than inflation.
Next steps for your investment property
Any real estate investment purchase requires a significant upfront cost.
Most traditional financial institutions view second homes or rental properties as riskier than a mortgage for your primary residence. That can mean higher mortgage rates and stiffer eligibility requirements for borrowers.
Private money lenders, like Marquee Funding Group, aren’t limited by the same cookie-cutter eligibility requirements. We consider each deal independently based on its likelihood of success.
Our team of Colorado real estate investors thrives working with complex, unconventional, or otherwise unique deals that conventional lenders shy away from.
Fund your Colorado property with Marquee Funding Group
If you’re thinking about adding an investment property in Colorado to your portfolio, the expert real estate investors at Marquee Funding Group are eager to learn more about your deal.
We strive to simplify deals that conventional lenders consider too complicated or unusual. We evaluate your deal based on its potential for success and use common-sense underwriting to make same-day approvals, often closing in less than a week.
To give you the best footing for the success of your deal, Marquee also offers loan amounts between $50,000 and $20 million, single- and multi-family loans, as well as loans for industrial, commercial, construction, and land purchases. We also approve deal-specific loan-to-value of up to 70%.
We want to work with you long-term. That’s why we prioritize relationship-building and cultivating mutual respect and confidence on both sides of the deal.
Buying a cash-flowing property in Colorado can effectively diversify your portfolio away from conventional stock-and-bond investments and generate extra income to help you reach your real estate investment goals. Contact Marquee Financial for more information, or submit your loan scenario today.