First Rental In Colorado

2 Replies

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?

Thank you!

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.

When finding tennants, make sure you screen them through a service like https://www.tenantbackgroundsearch.com/ or https://www.experian.com/screening-services/

The Landlord Resources section under the Tools menu on BP has a good bunch of services that are useful.

I'd also recommend checking out BP Podcast 356. Great insight from a veteran landlord.  https://www.experian.com/screening-services/

Ping me if you'd like to know more about the areas where you're considering buying and I'd be happy to share what I have.

@Vitaly Sa - Foreclosures and auctions are typically not best for first time buyers. It is like jumping in the deep end without knowing how to swim. 

You highly increase your chance of overspending because you are not able to see the property before you buy. 

If all of you're looking for is a 2+ bed and a 2+ bath, there are plenty of deals on the MLS that work. I wouldn't try to get overly fancy.