Rents in Colorado on the Rise

Good news for real estate investors in Colorado, there are more signs that the rental market is strong and continues to grow. According to a survey by Apartment List, rents in Colorado Springs increased by 11.4 percent year over year from March 2015-2016, that’s the biggest percentage increase of 100 cities surveyed nationwide. The national average was a 2.7% increase.

Aurora ranked 13th with a 5.8% increase in rents and Denver was 50th with a 2.5% annual increase.

When analyzing properties, we are often given ‘pro-forma’ numbers that show unrealistic upside between past and future rents. The potential for rent increases is sometimes wildly exaggerated. But it is a good sign to see that the overall rental markets in Colorado are increasing faster than the national average. In some cases you may find a property where rents have not been increased in a long time are are truly under-market.

Research the surrounding neighborhood to confirm market price for similar rental properties. It may be possible to find rents that are 10% or more under-market especially in places like Colorado Springs that have seen biggest jumps. We recently saw a 4-Plex in Colorado Springs where rents had not been increased since leases in 2012, so was a great value-add opportunity.

One way to keep your rents from falling far below market is to use what some people call ‘nuisance increases’ and to do it on every lease renewal. It could be as little as $20/month, small enough that the tenant won’t move out or look for a new place.

Does $20 seem like silly amount or waste of time?
On a 4-Plex ($20 x 4 Units x 12 months), that is an extra $960!

What is your strategy with rent increases? If you own property in Colorado, does the news about rent increases surprise you or does that fit what you have seen over the past year with your rental?

We would love to hear from you, leave a comment below.