Out of State Investing vs Colorado Springs

We’re launching a new podcast today that focuses on the benefits of buying rental property in Colorado Springs versus out of state. It’s called the Colorado Springs Real Estate Investing Podcast and is hosted by myself and our Colorado Springs agent, Jenny Bayless. In this first episode, Jenny compares the performance of two similar rental properties that she owned: one in a popular Midwest cashflow market and one in Colorado Springs.

This blog post chronicles the personal performance of two similar properties: one in a popular Midwest cashflow market, one in Colorado Springs. Both were ‘turnkey’/rent-ready and were held for ~2 years and then sold.

The purpose is to show why I transitioned from out of state investing to entirely in Colorado Springs. The is a self-reflection based on personal experience as a new real estate investor, and what works best for our personal investment strategy.

Three Learning Options!
  1. Listen to the podcast “#2: Out of State Investing vs Colorado Springs” 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.

Background

My out of state properties were in Indianapolis and Chicago in early 2016. My first Colorado Springs investment was in September 2016.

In mid-2017, I observed that my out of state properties had lower returns than the ones in Colorado Springs. By early 2018, I decided to sell our entire out of state portfolio and reinvest solely in Colorado Springs.

Indianapolis Pro Forma: Single Family Home (March 2016)

Pro forma for single family rental
Pro forma for single family rental

Key Takeaways:

  • High vacancy rate (8%)
  • Capex and Maintenance are higher than average (13%)
  • Appreciation not taken into consideration (0%)
Cash flow analysis of rental home
Cash flow analysis of rental home

A cash on cash return of 14.2% AND a cap rate of 8.6% are extremely positive and strong

Colorado Springs Pro Forma: Single Family Home (March 2017)

Pro forma for single family rental
Pro forma for single family rental

Key Takeaways:

  • Used 3% vacancy rate, standard for the area.
  • Budgeted for property management, even though I self managed
  • Price to rent ratio not at the 1% rule
Cash flow analysis of rental home in Colorado Springs
Cash flow analysis of rental home in Colorado Springs

A cash on cash return of 4.6% AND a cap rate of 6.2% are closer to average investments.

Indianapolis – 2 years of Operating Data

Operating Expenses for single family rental

Retrospective thought: I should not have relied so heavily on numbers prepared by others, and should have performed my own analysis.  However, you don’t know what you don’t know.

Colorado Springs – 2 years of Operating Data

Operating Expenses for single family rental

Retrospective thought: I should have used higher capex and maintenance figure, this property was previously flipped but there was some deferred maintenance.  Another aspect of me being fairly new to investing- I know more what to look out for now.

2 Years Comparative Data: Indianapolis vs. Colorado Springs

Sales Data:

Compare rental properties in Indianapolis vs Colorado Springs

Return on Investment Quadrant (ROIQ): 2 years of data:

Comparison of rental properties in Indianapolis vs Colorado Springs

Final Thoughts

Vacancy kills cash flow!

  • The Colorado Springs property had essentially a 0% vacancy rate over the last 2 years, whereas the Indy property was vacant for 3 months in less than 2 years.  This is likely due to demand of rentals and lack of supply of reasonably priced rental properties in Colorado Springs and vice versa elsewhere.

Personal introspective look: I realized I like control! 

  • By being able to be close to the property, even though I outsourced the majority of the work involved, there was a sense of control in that I could drive over to it, if need be which helped me to sleep better at night.

Strong economy = Strong performance!

  • The stronger growth economy of Colorado Springs helped significantly with the total return.  Even so, my cash on cash was still better than the property in a ‘cash flow market’.

YouTube Video: Out of State Investing vs Colorado Springs Investing

Analyze Before You Buy
Start Evaluating Properties Today with Our Free Toolkit
In a rapidly changing market, having the tools you need to help you analyze the data is critical. Know what the numbers will look like ahead of time so you don't buy a bad deal. Our toolkit is designed to help you thoroughly analyze any kind of deal so you can invest with confidence.
Start analyzing your Colorado investment properties today
Rental Property Spreadsheet • House Hacking Spreadsheet BRRRR Calculator Spreadsheet • Fix and Flip Deal Analyzer Investing Maps • Rehab Pricing Estimator
Start analyzing your Colorado investment properties today
Rental Property Spreadsheet • House Hacking Spreadsheet BRRRR Calculator Spreadsheet • Fix and Flip Deal Analyzer Investing Maps • Rehab Pricing Estimator
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.
Similar Post You Might Also Like
Colorado Springs
Can You Boost Cash Flow by Mixing Rental Strategies?
Residential multifamily investors aren’t locked in to just one rental strategy. In Colorado Springs, investors Greg and Heather are combining
Deal Analysis - Denver
How This Investor Still Lives for Free
Jeff White joins us to analyze his 7th house hack—just one away from his ultimate goal of owning 8 properties!
Sign Up For Our Newsletter
What do you want to learn today?