In this week’s Drinks and Deep Dives, Jenny Bayless joined me to talk about market trends for Colorado Springs and Denver, do a deep dive on a recent investment property purchased in the Springs, and answer questions from listeners and clients. For those of you who don’t know Jenny, she runs our Southern Colorado office. They are currently operating in the Springs with plans to expand down to Pueblo.
While Colorado Springs is not technically “out of state,” it does check off certain boxes that Denver investors are looking for when they decide to look outside of Denver.
- Listen to the podcast “#298 DDD: “Out of State” Investing an Hour Away From Denver & Market Trends in Denver and Colorado Springs” on the Denver Real Estate Investing Podcast“or #40 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.
Market Overview for Denver and Colorado Springs
From a high level overview, the Springs market is the same old, same old, though there’s a physical feeling that the market is a little bit less intense. It’s still hot and a difficult time to be a buyer, but there’s some breathing room now that wasn’t there earlier. Buyers don’t have to jump on something the second it comes onto the market and can take some time to evaluate it before deciding whether to put in an offer.
Looking at inventory for both the Springs and Denver gives us an idea of the state of these markets. Interestingly, inventory in the Springs had been steadily going up, but there was a drop between last month and this month. We’re still at significantly fewer homes for sale than at this point last year, which seems wild given that we were in the middle of a pandemic and sellers didn’t want people coming through their homes. In Denver, inventory has been increasing but is also still under the amount that was available last year. The difference between Denver and the Springs is that inventory in Denver grew 50% between last month and this month, from 2000 to 3000. This is the first time we’ve really seen a divergence between these two markets.
As far as showing traffic goes, Denver and the Springs are in line with each other. Between February and April, there were between 20-22 showings per property in Denver, almost double what we’ve seen the past couple of years. While we usually see a decline in the summer, there was a dramatic drop off that is uncharacteristic. The Springs similarly dropped from 18 showings earlier in the year to 12, though that’s still higher than the past few years, as well.
Rents are starting to go back up after seeing flat numbers from covid. Most landlords like to keep rents steady for good tenants and take the opportunity to raise rates when the tenants decide to move out. Now that people are starting to feel more comfortable moving, rent rates are going back up.
Jenny is seeing some of her own tenants leaving this summer and is renovating a couple of properties in the hopes of pushing rents. We’re going to walk through the properties and see how the renovations evolve, so look for that around late August.
Deep Dive into a Deal Analysis
Our deep dive this week was a deal analysis for clients who live in Denver but purchased an investment property in the Springs. Their goal is long term wealth building, so they focused on making sure they would break even while building equity. Thanks to Leah taking care of everything during the purchasing phase and hiring a great property manager, these clients have never had to step foot in the house! To read more about it, check out the Three Bedroom One Bathroom Rental Property for $283K blog post.
Questions from Our Audience
Finally, we tackled some questions from viewers and clients:
What’s going on with corporate rentals?
We recently did a show with Diana, who runs a corporate rental company, about what it takes to turn a property into a corporate rental and the difference in returns on this type of rental structure. Our team has also gotten in contact with a full-service corporate rental management company in the Springs to learn more about this space. She’s currently doing a deal analysis for a client who just closed on a townhome and plans to take this route. The client is in the furnishing stage of turning the property into a corporate rental.
We’re excited about the projected returns on this low maintenance home in a growing area, with a 7% expected cash on cash return. Once we get real numbers, we’ll have a better idea of how this will play out. Jenny is focusing on collecting more data on initial startup costs, about $10K total, to better understand the process. We’re seeing a lot of interest in this strategy from clients as a way to get more cashflow from their properties.
At the halfway point of the year, what are your investing goals for the rest of the 2021?
Jenny is really happy with all of the properties she has right now. There are two houses currently undergoing renovations that she plans on documenting for everyone to see. The hope is to make more of a rent bump once the renovations are complete, and then focus on stabilizing the rest of her properties.
I just closed on a rental property in Denver with an ADU a few days ago. I put 15% down to maximize leverage, and while it isn’t getting cashflow yet, it fits my 5-7 year plan. I’m also investing in my first syndication deal with some money from my retirement account, which has been a big learning process. Although there’s a lot more paperwork than expected, I’m excited with how it’s going. My plan is to do a couple of good investments every year, and then reinvest money into my businesses and properties.
Connect with Us
Reach out to us for investment consultations and property analyses, and be sure to join us every Wednesday at noon for more Drinks and Deep Dives.