5-Year Review: Is This Colorado Springs Rental a Good Investment?
Jenny Bayless analyzes a Colorado Springs rental home in this 5-Year Review.
5 Year Review: Is This CO Springs Rental a Good Investment?
This miniseries is all about reflection. Taking a look back to see how properties perform from the very beginning to five years in. As I sat down and looked at the numbers for this single-family rental in Colorado Springs, it is clear that while expenses might rise a bit, income does too. This is a great example of a simple rental property appreciating over time.

This miniseries is all about reflection. Taking a look back to see how properties perform from the very beginning to five years in. As I sat down and looked at the numbers for this single-family home in Colorado Springs, it is clear that while expenses might rise a bit, income does too. This is a great example of a simple Colorado Springs rental property appreciating over time.

Three Learning Options!
  1. Listen to the podcast “#119: 5-Year Review: Is This CO Springs Rental a Good Investment?” on the Colorado Springs Real Estate Investing Podcast
  2. Watch the YouTube video (at the bottom.)
  3. Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.

The Subject Property

We bought the property in the fall of 2018. I found the home on Facebook. Someone had posted a Coming Soon on a Colorado Springs Real Estate Facebook Group, and I responded to the post. They wanted $150k for it, which I thought was reasonable. Overall, it was a solid house. I reached out to the person listing it, and we rushed down there to see it the next day. It had great bones, so we went ahead and locked that up for $150k, and got to work rehabbing the house. We got new windows, new appliances, and there were a few electrical issues that the seller actually gave us a credit to correct them.

2018 Numbers

I personally painted the interior and exterior of this Colorado Springs rental, so it took me a really long time to do it. But I got rid of the mustard color on the outside and made the interior more neutral and appealing to renters. All in all, we didn’t put a ton of money into it to get it updated. We purchased it with a private loan. I’ve seen properties in this neighborhood sell for about $350k, but I would think ours is worth about $280k. Resale value aside, it’s a great rental property. We made about $4500 that first year with a net operating income of about $2000 for the year (which does incorporate mortgage interest, which is technically not a part of Net Operating Income). Once depreciation was factored in, we actually had a net taxable income of -$872. 

2019 Numbers

2019 was the first full year of operations. We had a rental income of about $14k. We experienced an insurance increase, which brought down our net operating income. Mortgage interest for 2019 was $8300 for the year. That made our net operating income $3000 for the year with a net taxable income of -$1600 for the year. This is a good showing of your typical first year expenses.

2020 Numbers

In 2020 we made exactly the same income for that year as we did in 2019. We didn’t raise rents because we had a good tenant. We did refinance the house to a 4% interest rate in 2020, which we knew would help us in the long run. Our tax expenses went up because Colorado Springs does assessments every other year. Our mortgage interest went down due to amortization. So, our net operating income for 2020 was $6400. With depreciation, our taxable income was $1800.

2021 Numbers

Our rental income went up in 2021 because our tenant left, so we had an opportunity to increase rent for the new tenant. With Colorado Springs rental demand high after the pandemic, it was easy for us to increase rent to market rent for the next tenant. We increased the monthly rent from $1195 to $1550 between the two years. Since we got a new tenant, we did have to deal with tenant turnover expenses. One expense that I paid for during this tenant transition period was getting a Matterport 3D tour. It cost about $200 and it saved my time because prospective tenants could explore for themselves without having to do a showing.  

Our expenses in 2021 were mainly cleaning and maintenance. Insurance increased by over $100. Mortgage interest went down due to amortization. We had to pay for repairs to the fence before the new tenant moved in. Taxes went up just a few dollars. So, our net operating income was $5600. With depreciation, our taxable income was $1000. I will say turnover costs are an underappreciated cost when it comes to real estate investing. Cleaning and maintenance totaled $1500 just to take care of typical renter turnover items. Definitely, something to keep in mind. 

2022 Numbers

In 2022, our insurance went down by about $100. I asked my insurance broker to shop us around, so we got a better deal. Mortgage interest went down due to amortization. Repairs were minimal at $600. Taxes were assessed in 2022, so they increased to $775. Net operating income was $10,000, then minus depreciation, the net taxable income was about $5500. 

5-Year Takeaways

After 5 years, I can say this was a good investment property for us. Putting the numbers down, it was good to see the trends in income and expenses. Understanding the need for incremental increases in rent to be consistent with the market and with rising expenses is critical. This helps you continue to see the income increases you want year over year.

Connect with Jenny

Jenny Bayless is an investor-friendly agent with Envision Advisors, Colorado real estate investor, and the host of the Colorado Springs Real Estate Investing podcast. Connect with Jenny by emailing her at [email protected].

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Authors
Jenny Bayless
Jenny Bayless is an investor-friendly agent with Envision Advisors, Colorado real estate investor, and the host of the Colorado Springs Real Estate Investing podcast.
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