Our guest today is Gretchen Place, an investor based out of a Denver suburb. A few years ago, she and her husband started investing in Colorado Springs. Over time, those investments have proven to be solid, but as the market in the Springs began shifting, they turned their focus to Pueblo. We talked about how they got started in the Springs, why they made the move to Pueblo, and how their strategy is shifting.
- Listen to the podcast “#91: How to Pivot When the Market Shifts. Buying a Medium Term Rental in Pueblo.” on the Colorado Springs Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
Why Start Investing in Colorado Springs When You Live in Denver?
Gretchen and her husband started looking at real estate investing about eight years before jumping in. They began their search in Denver, but they couldn’t find anything that would be a homerun for them.
Instead, they turned their attention to Colorado Springs and found a house with a cottage behind it. They liked the model of having two units because if one was vacant, the other could cover the mortgage. Luckily, neither has been vacant and it’s proven to be a great investment.
After that, they purchased a triplex not too far away. The property is a Victorian house with a 3 bedroom/2 bathroom unit in the front, a one bedroom/one bathroom unit attached in the back, and a 350 sq ft cottage in the backyard. All of the units have been consistently full, even the small cottage!
Once the market started tightening in 2019, they decided to get creative with their next property. They purchased a 4 bedroom/2 bathroom house that had a 3-car garage. To continue their strategy of having multiple units per property, they decided to convert the garage into its own living space.
What’s the Process for Converting a Garage into an ADU?
Accessory Dwelling Units (ADUs) are a hot topic, and a lot of people are interested in how they can convert a garage they aren’t using into an ADU. Gretchen says the main thing to be aware of for this type of project is zoning.
In their case, the lot was already zoned R-2 (Two Family Residential), meaning they could have two units. The garage was far enough away from the lot lines that they could legally convert it without having to alter the footprint. The biggest expense was running the sewer line, which was connected through the main house. Logistically, this wasn’t a big deal since their other properties also share water and sewer.
The budget for this project, which also included renovations to the main house, was $85K. It ended up costing $110K.
Why Pivot to Investing in Pueblo?
After a few years in the Springs, they were no longer seeing the same types of returns they started with. They knew it would be easier to invest in Pueblo and wanted to try out a medium term rental strategy. Their current properties in the Springs are already leased up and have good tenants, so it would be difficult to convert them.
Finding the Right Property for a Medium Term Rental
Gretchen and her husband started looking in Pueblo during the summer of 2021. They wanted to implement a medium term rental strategy focusing on traveling nurses and healthcare workers, so the property needed to be close to the hospital. They closed on a property in September, and while it’s a little unusual, it’s perfect for what they want to do.
There’s a small, 720 sq ft house that’s 2 bedroom/1 bathroom. The lot is adjoined with another one that has a larger, 1650 sq ft house that they converted into an up/down duplex. Like their other properties, all units share a water line. They paid $281K for the entire property.
Operating a Medium Term Rental in Pueblo
It took some time to finish all of the renovations, so they’re just now at full occupancy. They’ve gone through one full rental of the small house, which went well. Once the properties were ready to rent, they had no trouble filling them using Furnished Finder, a site geared toward nurses and healthcare professionals.
They aren’t self-managing this property, so they hired someone to clean and turn the first unit. Gretchen is still working out the process but is hopeful it will run smoothly. There are a lot of medium term rental property management companies in the Springs, but that infrastructure doesn’t yet exist in Pueblo.
While reviewing applicants for the units, Gretchen noticed they were getting a sizable number of inquiries from construction workers. With the increase in construction happening in the area, she realizes there’s a market for medium term rentals for construction workers. For now, she’s focused on healthcare workers since that’s what she had in mind while decorating the units, and adjoining walls make it difficult for tenants who are on opposite schedules to coexist.
Is It Worth Operating a Medium Term Rental in Pueblo?
While there were some unexpected headaches getting the renovation work completed, Gretchen would absolutely do it again. It helps that she and her husband are both self-employed and work from home, so they have the flexibility to go down to the property as needed. Now that the properties are up and running, they’re expecting solid returns and fewer hiccups as they finetune the process.
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