I have graduated college, looking for full time work, and am looking for a home to live in and rent out a room. So ideally 2/2 or bigger. I am looking at auction.com for foreclosures as well. If I were to find a proper foreclosure I could get access to cash. I have a few areas in mind but would love some suggestions on the matter:
What should I be looking for in a foreclosed home (positive/negative)?
Should I purchase an investment property in a different state and rent in my local area instead for a less expensive upfront price?
What precautions should I take when looking for a tenant?
Real Estate Agent · Littleton, CO · Member since 2014 · 74 posts · 45 votes
6y
Be careful with foreclosure auctions. Many times you'll have to purchase the property sight unseen. You'll want to make some assumptions as to how much it might cost to do repairs. Colorado law sets definitions for "habitability" for rental properties. It is even more strict if you want to rent it out to section 8 renters. When you run your numbers, always make sure you account for the unexpected cap expenditures. The other thing you'll want to research is location, location, location. Some areas have better rental rates and lower vacancy rates than others.
As for another state, Colorado has a couple of strikes against it. Laws in Colorado are written more in favor of tenants. Things like evictions and return of security deposits can be a bit sticky. The other strike is in lower cap rates for Denver due to the high price of real estate. If your strategy is more of an appreciation play, it's great, but your immediate cash on cash return will be lower.
If you choose to invest out of state and rent here, you might have a challenge getting enough cash flow on your rental in order to offset the rent for your personal residence. Consider BRRR.