Colorado Springs buy and hold - Anyone investing here?

Question

Hey BP community! Is anyone currently investing in Colorado Springs or have any experience investing in this market? I currently own two single families just North of Denver and am looking to move into small multi-family. I'm interested in exploring CO Springs as my next potential market since it's a bit cheaper than Denver but know it's a funky town and want to get a handle on the neighborhoods. I'm a long-distance investor based in the Bay Area California. LMK if anyone is open to connecting on this! TY

Jeremy Gaal · Answer

@Leah Copertino,

There are plenty of us floating around here. Finding deals is tough these days as we have experienced a renaissance of sorts between extremely low inventory, covid, and people realizing how great the area is. With that said I'm sure other Springs investors will pop up in here and happy to answer any questions you have the best I can. For reference, I have one SFH as a rental and am closing on a second.

Alec Zielinski · Answer

@Leah Copertino, I couldn’t agree more with @Jeremy Gaal! Both my wife and I are real estate appraiser in Colorado Springs and own a couple of duplexes in the area. It’s an aggressive market out here and could potential pay higher than listed.

What exactly are you looking for in terms of unit(s) and what is your timeline.

Leah Copertino · Answer

@Jenny Bayless Amazing congrats on your most recent acquisition! Are there certain areas you guys target and certain areas you avoid? Normally I like to fly out to do some neighborhood scouting myself but I don't think I'll be able to this year with Covid (and being 7 mths pregnant ;) ) and don't want it to slow me down! I generally try to buy B class properties in A or B class neighborhoods. Definitely want to make sure I'm looking in nicer parts of town where I can rent out to quality tenants. Any local guidance would be really appreciated! Looking to buy triplex or quad ideally where I can build in some forced appreciation through upfront upgrades like paint, carpeting, landscaping, counters/appliances, new fixtures, etc

cc @Alec Zielinski @Jeremy Gaal

Leah Copertino · Answer

Hey @James Carlson thank you so much for the perspective! Agree, not really buying in Colorado for pure cash flow and are more viewing it as an appreciation play. Our two SFHs are actually in Arvada, which we love as an investment area, especially with the new lightrail. But with our scale goals, it's a bit more expensive than we'd like, which is why we're looking at somewhat more affordable markets. Assuming that's how you ended up in the Springs from Denver as well? I think ultimately we would look to buy a couple more doors in Colorado and then invest additional dollars in the Midwest (eyeing Cleveland) to create a portfolio balanced in cash flow and appreciation opportunities.

Haven't thought about short terms in Arvada - Is there a healthy market for that there? Changing legislation continues to make me nervous about short terms. Plus I don't live in the area so would have to outsource all the mgmt and turnover process between visitors. Would def be open to it though! An interesting thought

Jenny Bayless · Answer

@Leah Copertino For multifamilies here, there is definitely a very low supply on the MLS and the when something comes available, it gets picked up pretty quickly!  However, that is not to say they are impossible to get- just have to be quick and decisive :). They are definitely a type of rental property to look for, especially since you can get a larger asset with pretty cheap debt at the moment.

James Carlson · Answer

@Leah Copertino

You're exactly right. We love our Denver properties and would buy there again if we found the right place. (For instance, I'm eyeing a tiny 1br/1ba SFH for under $300,000 in an interesting Denver location that I'm trying to get someone to buy right now.) But yes, primarily, we're looking in Colorado Springs for ourselves because of the somewhat lower entry point.

The Arvada Airbnb market is interesting. Yes, there is a healthy demand for it. We bought a temporary subscription to AirDNA, the site that scrapes data from STR platforms and estimates a property's/neighborhood's/city's revenue potential. What we see on there -- and this is a broad stroke -- is that a 3-4br home can nab $40,000-$50,000/year in revenue. Now, you've got 20-25% in STR management plus all utilities, so you can do the math to see if something like that makes sense.

What is really interesting is when you step into the 5br+ space, the revenues seem to go up very quickly.

James Carlson · Answer

@Leah Copertino

Congrats on the properties you already own. We've been in your shoes. We've owned as many as three places in Denver (now down to two) and then started looking in Colorado Springs in the last two years. We own two houses down here now as well. Truthfully, neither Denver nor Colorado Springs real estate markets are the cash-flow gravy trains you can find in the midwest, but that's not the whole picture when it comes to making money with real estate. It's a dirty word on this site, but the appreciation potential of both markets is way beyond anything you find in the midwest.

We tell our clients to expect to break even with any traditional long-term rental when you account for all expenses (PITI, repairs, vacancy, capX, etc.). There are a couple areas that can still work that way. Now, if you get creative and do house hacking (or simply a rent-by-the-room), you can cash flow well. Another option is a medium-term furnished rental. This is actually what we do with all our properties now, and we've seen success with the travel nurse/remote worker renter with everything from a 300sf studio to a 1br condo to a 3br condo and now a 4br house in the Springs.

If you're already on the north side of Denver, have you thought about buying in Arvada and doing Airbnb? They just passed a law to allow short-term rentals in investment properties.

Whatever path you take, I wish you luck!

Jenny Bayless · Answer

@Leah Copertino I have had a lot of luck investing in buy and holds in Colorado Springs over the past few years.  It is hard to find a good deal, but they are definitely out there!  I am under contract on one currently that I found on the MLS.  I agree with @Jeremy Gaal in that inventory is extremely low, so if you find something you like you have to act fast or else someone else will pick it up.

Chris Lopez · Answer

@Leah Copertino reach out to @Jenny Bayless. She knows the market and has buy and hold rental for herself under contract now.

Colorado Springs buy and hold - Anyone investing here?

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