Why Don't More People House Hack in Colorado Springs?

17 Replies

Colorado Springs is a good example of a secondary city that is currently inundated with construction cranes, university and college growth (UCCS is expanding fast) and a lot of out of state money (Colorado College parents, Texans and even Californians.) 

We have seen a ton of success with Colorado Springs house hacks (outlined below), but a lot of people in Denver remain resistant to this option while also lamenting that Colorado Springs is changing. 

If you are resistant to Colorado Springs, do you see yourself changing mind on that? Do any of the examples below help?

  • Colorado Springs House Hack No. 1 | Full disclosure: I told someone else to buy this but they declined, so now I am buying this house.
  • This is a 4/2, 1.1 miles east of downtown Colorado Springs. 2 of the bedrooms and 1 of the bathrooms are located in the basement and it has a separate/exterior entrance to the basement. 
  • The cost of this house is $390K and the mortgage will be approximately $2000/month.
  • The average long-term rent for the entire place according to Rentometer is $1700/month, and if you only rented out the basement, the average rent would be $1200/month.  
  • For short-term rents (Airbnb), AirDNA estimates you could get $3500/month on average through the year if you rented the entire home. If you lived upstairs and only Airbnb'ed the basement, you could expect to make $2600/month on average for the entire year. 
  • To summarize, if you lived in this property and long-term rented the basement, your mortgage would likely be close to $800/month. If you lived in this property, and short-termed the basement, you would likely cash flow $600/month. 
  • One other thing to note: I looked up similar properties in Denver (within 2 miles of downtown, a 4/2, 1700-2000 sq ft) and the cost range for houses sold under that criteria for the past 3 months range between $570K and $672K...so there is a though that in addition to cutting down your mortgage or cash flowing each month, you may also stand to gain a lot of appreciation in Colorado Springs.

Colorado Springs House Hack No. 2 | 

This is a 6/3 house located in Widefield. It cost $290K to buy. The mortgage is approx. $1700/month. On average, long-term rents are $1800/month in this neighborhood (data based on two properties in the past 12 months.. so yes, a smallish data set.) 

Rather than long-term rent or Airbnb this house though, our client is opting to rent by the room. He is repeating this model as he's done something similar within a mile of this property. He is furnishing the house and providing a queen bed and a tv set for each room. He also provides weekly cleaning and lawn services. He will live in the house and rent out each bedroom for $800 (he already has two bedrooms filled and hasn't even closed yet- so, yes, there is demand.) Assuming he rents the remaining 5 bedrooms at $800 each, he'll collect $4000 in rents each month... which is well worth it even when you consider paying for utilities/cleaning and lawn service.  

I do not invest in CO, but thought I'd throw out what I use to consider property.  

I like to buy property that, including purchase cost and rehab cost, will rent for 1% through traditional one family rents the unit at least on a month to month lease terms.

Those properties fall way short for traditional renting.

I know very little about Colo Springs, my cousins liked there when I was a kid and I remember it as a hippy type area.  It seemed to get worse each time we passed through.  

Does the property value increase by a lot yearly?  

Maybe that is the saving grace.   

Where I invest increased 16% in value last year, and that with 1% rent.

@lynette e. - I know that everyone prefers certain investing models, but I'm not really sure why someone would care if it is 1% over through long-term rents as opposed to the different models proposed. Money is money and while I know there was a traditional way to invest, the market has changed. Airbnb, in fact, has changed a ton- so it seems like it's to an investor's detriment to ignore that. 

And, yes, Colo Spgs is growing like crazy. It's really benefiting from the overflow of people that cannot afford Denver. I grew up there, couldn't wait to leave, and now I'm starting to understand why so many people from out of state want to be there. 

Originally posted by @Erin Spradlin :

@lynette e. - I know that everyone prefers certain investing models, but I'm not really sure why someone would care if it is 1% over through long-term rents as opposed to the different models proposed. Money is money and while I know there was a traditional way to invest, the market has changed. Airbnb, in fact, has changed a ton- so it seems like it's to an investor's detriment to ignore that. 

And, yes, Colo Spgs is growing like crazy. It's really benefiting from the overflow of people that cannot afford Denver. I grew up there, couldn't wait to leave, and now I'm starting to understand why so many people from out of state want to be there. 

I like the traditional renting as I self manage.  Interview and deal with one family, their problems are not my concern.  Filling beds with unrelated people means that I would have to interview and select many more people, more time on my part.  And the drama is now part of my problem.  A bad roommate can run off the good ones fast.   And that type of renting can be discontinued by the governmental authority over that area.  So, if I plan on that the get a positive cash flow, then I could loose that cash flow and be left with limited exit plans.

And for Air BNB, nope, not as a self manager.   I do not want to invest that much time on each rental, nor do I want to deal with cleaning, furnishings, etc.  

I like easier money.  I look at what I make per hour of my time, and the STRs do not meet that requirement for doing things I do not like.  You have to pay me way more than $50/hour to clean someone's nasty sheets.  And I do not want to deal with PMs or hiring help at this point in time.

Ok investment for some, just not me.

Thank you for opening a discussion regarding this topic. I have been interested in house hacking in the Colorado Springs area, but have some reservations in pursing it. My concerns may be personal or unique to my situation, but I thought I would share in case others have similar concerns and were seeking feedback as well.

1) Moving: I may need to move away from the area for work or family. I do not mind house hacking, but I also want to make sure my property with cash flow if I need to rent the whole property. These properties and several properties I have found in Colorado Springs do not meet the 1% rule. They work to build equity and lower your expenses if you are house hacking for sure, but I want that extra safe guard if I need to leave and rent the entire place.

2) Safety: I use to travel for work and stay in airbnbs and rent off craigslist with really good luck actually with a few exceptions that weren't even that bad. I knew I could always leave, but if there is someone in my home I feel uncomfortable with or refuses to leave, I can't just leave. I certainly do not mean to insinuate males do not have safety concerns as well, but I am more concerned as a female. I do wish I could hear more stories from SINGLE female house hackers to put my mind at ease or give me tips.

3) Pets: My 12 year old dog/daughter loves people and other animals and traveled everywhere with me, but I do have concerns leaving her in the home with someone I feel is not familiar with dogs (may let her out, give her unsafe foods, etc) or someone that may harm her. Any tips on this matter is appreciated!

I am aware that many of my above concerns could be resolved with buying a duplex or something similar, however, I find these are few and difficult to make the number work if I were to have to rent out the entire property as well.

Feedback, advice, tips, etc. always appreciated :)

We've been house hacking in the Springs since 2015. When we bought our duplex I didn't even know "house hacking" was a thing. It just seemed like it was an easy way to live for "free". The day before we made an offer on the duplex we almost put an offer on a horse property (I loooove horses) but had just come off the road after traveling full time in an RV for four years and wanted to keep our life as simple as possible. (Horses are a lot of work!) House hacking has helped us maintain that goal by keeping our expenses down. I love it! I should note...we even have four kids. So many people say it's not possible with a family. That said I wouldn't do it if I didn't have a property with a separate entrance and private spaces.

@Erin Spradlin - I do have a few friends that invest in the Springs and they LOVE it. My hesitation, and this is strictly personal, is that I really don't want to have to drive an hour each way to check in on an investment property. For me, that's basically a long distance investment. If I am going to invest long distance, I figure that I might as well pick a spot in the country where I can buy all cash! 

Otherwise, I think CO Springs is a good place to invest! 

@Craig Curelop - I totally understand where you are coming from. Even if you are coming from Denver, the proximity in an emergency is not convenient, so I get why people would consider that more trouble than it's worth. On the flip side, if you like money... Colorado Springs is a pretty great place to be at the moment. 

@Jenn N. - That's so great! Great that you've found a way to limit your expenses through real estate and that you've done it with a family. I know a lot of people that have reservations because they have kids (understandable) but it sounds like you are making it work.

@Britteny Godar - Interesting. Take this for what it is (and certainly some people on this site will disagree with me), but I believe you should buy real estate and then wait and not wait and then buy real estate. I also think people get too tethered to the numbers or a certain metric. I understand wanting the 1% rule, but why is that particular metric so important, when you could be cash flowing using lots of different models? I know this to be true because I've had over 25 different clients do it in the past 2 years and I have myself as well. I am not advocating for an irresponsible decision and I do think it's important to know your data- but I guess I just see people get stuck sometimes on the 1% rule or cash flow or whatever, and sometimes I think there is value in thinking about pulling it back and looking at the view from a 1000 feet. 

@Lynnette E. Lol. I agree that Airbnb is not easy money and can be quite the pain and I also totally agree that one bad personality can ruin things for everyone else. I don't actually think regulation is going to take out the room by room model as this has long been a pretty standard tenant rule, and as it stands in my part of Colorado at least- it's been no more than 4 unrelated individuals in one place at any time but I don't know who is monitoring that. 

I appreciate and respect your desire for easy money though. :)

@Erin Spradlin I house-hack in The Springs and it's been phenomenal. I have a 4/3 in village 7 and my tenants cover the mortgage/utilities along with my gas/food bill every month. I've also found that if you put the work in up-front with screening and setting expectations it's not difficult or uncomfortable. I hardly see them and they keep the place very clean. 


@Daniel Haberkost - I totally second your thoughts. I know a lot of people have fears about becoming a landlord, but it really hasn't been my experience that the tenants have been too bad (knock on wood). Likewise, many of my investor friends haven't really had issues either. I think it's just about the initial screen and staying on top of it.

Glad you are having success in Colo Spgs. We think it's a fantastic place to invest. 

I started house hacking in Ohio for less than $5k. I've met fewer than 5 people who currently or used to house hack. While there may be regional factors, I think there are plenty of universal factors that hold people back, many of which are the same as why many don't invest in REI at all--it's less comfortable than having your own SFH, it takes time to research, it's risky, it involves a down payment and financing, etc.

@Britteny Godar, I appreciate your perspective. I also generally agree with it on a gut feeling level - but on paper, the numbers can work. I have not house hacked and probably won't do a traditional house hack any time soon due to our attachment to our current home.

That said, I did want to point out that from people I've interacted with at REI groups, I think there are answers to a lot of your issues - even in Colorado Springs.

1% Rule: Colorado Springs usually does not meet the 1% rule, but the 1% rule is not a very good rule for estimating cash flow. If you need to replace appliances, for instance, they are roughly the same cost whether you put it into a 400k SFH in Denver or a 65k SFH house in Pueblo -- or even 200k house in pueblo just down the street, for that matter. When it comes to percents, Wood, Nails, and Shingles don't care what you bought the house for or what it rents for. (Property managers do though)

I've been running numbers in the Springs a lot this year. Most MLS properties do not cash flow if you're not living there, by my math... but a handful have. You're right that they don't come up often, but a good realtor will help you with that. I'd happily put you in touch with one that's brought me cash flowing deals this year, if you're interested.

Safety: I think other responses have way more experience here and had good suggestions. Although, I have to add that I've heard that if you're really concerned, it's a good idea just to put any new tenants (especially if it's a rent-by-the-room deal) on a month-to-month lease to start (say 3 months) so that you can move on quickly if you need to.

3. Pets: Not legal advice... but AFAIK, you CAN discriminate on people's comfort with dogs. It's not a protected class, unless there's a disability of some sort that affects the dog issue. Any of the realtor's I'd use these days are investors themselves as well as either property manager or part of a brokerage that has property management... so you can actually plan your investment out with them and use their experience to help make it successful.

Plex argument: Very few plexes come on the market, but a few have and cash flowed renting out the entire place. You will need to be ready to move as soon as it hits the market though, for sure.

@Nicole Heasley - Totally agree, which is why we need more financial literacy in the United States. It's not surprising people are reticent to spend so much money on something they know very little about.

@Jeremy Norman - All good points- especially the focus on the 1% rule not being the end all, be all and putting people on shorter leases. For the bad reputation short-term rentals get (Airbnb), at least those tenants are in and out- whereas a bad long-term renter is a long-term problem.

The Army moved us to COS, but rather than pay high rent prices, we just purchased a house. Its a 4/2, but if you close on interior door its 2x 2/1 units. We furnished as a BNB, and we have not made our first mortgage payment, but have already brought in 3 months worth of rent in income.