Needing Advice re: selling or renting out a 4200 sq ft home

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Needing Advice re: selling or renting out a 4200 sq ft home

Heather Hall
Rental Property Investor · Fallbrook, CA (San Diego area) · Member since 2019 · 98 posts · 30 votes

Should I sell my home in Colorado Springs/ Broadmoor area or convert it into a rental?? First I will list the specs on the house and then I will list my questions. Thanks for your advice!

A) Home specs

* It is 4100 sq ft total and is essentially 2 homes in one, due to the basement apartment. The home is 3- stories, including the basement.

* basement apartment: 1200 sq ft (2 bed / 1 bath). Completely remodeled and updated with high-end finishes in 2016. The apt does not have its own entrance from the exterior; it must be accessed from the interior of the home via a basement door and stairs off of the living / kitchen area.

* The main home is 2900 sq ft (3 bed/ 2.5 bath) and has 2-floors. Completely updated kitchen/living/ dining/bathroom with high-and fixtures in 2016. The master bath and guest bath upstairs were not remodeled but they are in good shape. Attached 2- car garage.

* The home sits on a 1- acre lot, and the backyard is a tiered oasis with fountains frequented by deer, great views, gazebo, fire pit, hot tub, and several different seating areas with incredible trees

B) Questions/ comments:

* Is it best to sell now or will the market be even stronger next spring/ summer? Or is it best to hang onto as a rental for years to come, providing passive income?

* If the home becomes a rental, Is STR or LTR better?

* If STR, is it best to have a minimum rental period of 30 days, such as a corporate rental? Or a vacation rental of 3-7 days minimum rental? (I'm leaning toward STR/ corporate rentabecause that allows me into the home every few months or every few weeks, to make sure it is still in good condition)

* If LTR, is it more risky, due to wear and tear on such a large, updated home?

* Rental rates for LTR or STR?

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Jeremy Gaal
Rental Property Investor · Colorado Spgs, CO · Member since 2020 · 91 posts · 61 votes
5y

@Heather Hall rental rates for the home could be found by looking up similar homes (though comps may be tough due to its size and the land its on). What I can tell you is the economy is strong here in COS and seems to be getting better all the time. If you've lived in the house 2 of the last 5 years you could sell it and not have capitol gains (I believe, check with someone much better equipped in this area than I am).

With that said, everything I have seen and the research I have done is saying this: the market here will likely remain strong for the next 4+ years. Even if we could double the houses being built, we still wouldn't have enough housing for the expected inflow of people. The front range is expected to double in size by 2050.

All of this to say you're in a great market. If you're looking to get into rentals, maybe a better idea is to start a little smaller home wise and cash-out refinance the big house to buy 1 or 2 smaller homes to cut your teeth on? Personally, I'm buying when I can (currently working through a new rental deal) and will continue to do so. What is it that you are looking to gain from your rental? Knowing why you are doing it will definitely help decide what path to take.

Congrats on having a fantastic property and let us know what you ultimately decide to do.

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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    5y

    Almost none of that matters. The biggest concern would be are you in a bad market or have you had over $200k in appreciation? If you’ve had decent appreciation you never turn it in to a rental as you are giving up a tax free gain that will take years to collect in rental income. You’d be better off selling and buying an identical house for tax purposes. Oh, you’d never buy it for a rental because it makes a bad rental? Well there you go. 

    1Reply
  • Jessica Mead
    Real Estate Agent · Colorado Springs, CO · Member since 2020 · 21 posts · 16 votes
    5y

    @Heather Hall It sounds like a beautiful house! I would start by researching the STR laws where the property is located. In late 2019, the City of Colorado Springs passed legislation which does not allow for non-owner occupied short term rentals (with a few small caveats). The city's website has a zoning map which should help you determine the viability of the STR strategy. Another thing to think about is zoning - if you can't turn it into a STR, could you rent out the top and bottom separately?

    My next step in analyzing the trade off between selling versus renting would be to look at the numbers. What is your monthly PITI and what do you think you can rent it for? If you turn it into a LTR, what do the numbers look like? Will it cash flow after you pay all expenses and account for reserves?

    Hope this helps!

    1Reply
  • Heather Hall
    OP
    Rental Property Investor · Fallbrook, CA (San Diego area) · Member since 2019 · 98 posts · 30 votes
    5y

    That does help a ton! Thanks Jessica! 

    0Reply
  • Jeremy Gaal
    Rental Property Investor · Colorado Spgs, CO · Member since 2020 · 91 posts · 61 votes
    5y

    @Heather Hall rental rates for the home could be found by looking up similar homes (though comps may be tough due to its size and the land its on). What I can tell you is the economy is strong here in COS and seems to be getting better all the time. If you've lived in the house 2 of the last 5 years you could sell it and not have capitol gains (I believe, check with someone much better equipped in this area than I am).

    With that said, everything I have seen and the research I have done is saying this: the market here will likely remain strong for the next 4+ years. Even if we could double the houses being built, we still wouldn't have enough housing for the expected inflow of people. The front range is expected to double in size by 2050.

    All of this to say you're in a great market. If you're looking to get into rentals, maybe a better idea is to start a little smaller home wise and cash-out refinance the big house to buy 1 or 2 smaller homes to cut your teeth on? Personally, I'm buying when I can (currently working through a new rental deal) and will continue to do so. What is it that you are looking to gain from your rental? Knowing why you are doing it will definitely help decide what path to take.

    Congrats on having a fantastic property and let us know what you ultimately decide to do.

    3Reply
  • Heather Hall
    OP
    Rental Property Investor · Fallbrook, CA (San Diego area) · Member since 2019 · 98 posts · 30 votes
    5y

    Thanks Jeremy!  I have actually thought the same thing re: selling this large property and buying smaller ones but it seems it is very cost-prohibitive to buy properties right now, especially due to the COVID- induced, mad-dash for single family homes.

    Here are some facts about me and some goals:

    1 - recently retired from mil/ government service and now setting my sights on real-estate investing, with an emphasis on the BRRR method. I'm very interested in STRs/ corporate rentals. I also hope to be involved in starting or managing a nonprofit to house homeless veterans in sustainable housing. I'm very interested in container homes on acreage for veterans so they have a quiet place to heal.

    2- We are moving to CA this summer to be closer to family and I’m downsizing from this large family home in COS/ Broadmoor which was our primary residence for several years and has never been a rental property

    3- my gut says sell the large COS/ Broadmoor property and focus on buying distressed properties in CA, restoring them, and then renting them out to folks.  I like the idea of being in the same local area as the rental properties 

    4-  I’m fairly new to rental investing and if I rent out the Broadmoor home, it would be my first rental home

    5- we also have a small cabin in woodland park that we would like to hang onto and rent out also- to a long-term tenant. It’s a quiet peaceful place and we love the neighbors and want to make sure it stays quiet which can be tough to do with an AirBnb or VRBO.


    thanks again!


    0Reply
  • Heather Hall
    OP
    Rental Property Investor · Fallbrook, CA (San Diego area) · Member since 2019 · 98 posts · 30 votes
    5y

    @Jeremy Gaal

    0Reply
  • Jeremy Gaal
    Rental Property Investor · Colorado Spgs, CO · Member since 2020 · 91 posts · 61 votes
    5y

    @Heather Hall that is a really great rundown. As a veteran I love the idea.

    For a house that big I feel like it would be a LTR unless you have a specific idea for it (ie like a wedding venue house or something like that).

    I also really like the cabin idea that you have and have been thinking about a similar idea to Airbnb/STR after I close on my next deal.

    With that said you have some great ideas and always happy to lend an ear if you need to talk something through.

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