Vacationing in Colorado is fantasticyou can unwind, suspend your troubles and responsibilities for a while, enjoy the vast natural beauty, and take advantage of all the entertainment available. Rather than spend your savings each year to reserve lodgings for your vacation, why not invest that money into a mountain retreat of your own? That way, in addition to having your own year-round vacation home, you can count on an extra source of income if you choose to rent it out when youre not there. Whether youve never thought about buying an investment property or you have been considering it already, see below to decide if it is right for you. There is a lot to consider, not the least of which is whether you want to use the property as a vacation home and a part-time rental or strictly as a property that will bring you income.
Buying an Investment Property in Colorado
These are some considerations that are intended to help people who are beginners to investing in rental property decide if its a step they want to take.
Are Investment Properties Worth It?
How often do I think Ill be using the home? In the relatively niche market here in the beautiful Colorado mountains, the numbers are indicative of continued high demand and low supply. This means that the property you acquire stands a good chance of being profitable in the long run. To get a better idea of the amount that you will need to invest in the property, check out our mortgage calculator on our Buyer Resources page. Keep in mind that most lenders require more of a down payment for second homes/investment properties than a primary home and even more for condos compared to a townhome or single family home. You may need to factor in additional monthly fees such as Home Owners Association (HOA) dues to your payments. While real estate taxes in our area are still fairly modest compared to other areas of the country, they can vary depending on the neighborhood.
How Much Can I Expect to Make in Rental Income?
This really depends on the type of property. It also varies depending on if you utilize a rental management company or manage things yourself, and how much you utilize the property for personal use. Most units are only rented about 100 days out of the year, mostly during weekends and holidays. In the past, we used to say rental income would probably only cover your monthly expenses like HOA dues and utilities. But lately demand for nightly rentals has increasedour summers are more active, shoulder seasons are not as quiet, and the snow is good! We can help you with rental estimates from different companies. We also have resources that can help you capitalize on your income, and we can help guide you through which properties have the best rental return and why.
When Should I Buy an Investment Property?
When it makes sense for you, you should take the state of the real estate market as well as your current financial situation and financial goals into consideration. The real estate market can be difficult to predict, so you may want to consider talking to the experts at Real Estate of Winter Park for informed advice. We also suggest you consult your financial planner and accountant. The tax code is complicated, and everyones financial strategies and situations are unique.
LLC vs. Insurance
Limited Liability Companies (LLCs) are intended to offer asset protection in the case that something goes wrong and you find yourself in a lawsuit that exceeds your insurance coverage. Investment property insurance essentially serves a similar function as other insurances; that is, as a safeguard against possible emergencies, disasters, and otherwise unforeseen events. When deciding between LLCs and insurance, it is a good idea to seek the advice of a professional. However, keep in mind that there are restrictions if you finance your property as an LLC as most lenders will consider an LLC purchase a commercial loan.
Investment Property Management
You have to keep your investment property up if you want to continue making income from it! You can do this yourself, or hire a property manager to take care of the property for you, though that decision comes with its own set of pros and cons. There might even be initial expenses to get your property ready to rent, like purchasing things renters might need (or want!) like new furniture, humidifiers, pack-n-plays, or a hot tub. Most renters want to stay in nicer places than their primary homewhat could you do to make your condo stand out?
Were Here to Help!
Buying an investment property or any real estate is not a small step, and there are many factors to consider. It is far too much to cover completely here, but we have all kinds of free information available for you, from general resources to insight on the market and more. Of course, our best resource is our Realtors, so dont hesitate to contact us today! If you already know that you want to buy an investment property, start your search with Real Estate of Winter Park. We provide the most extensive listings of all Winter Park real estate and homes for sale, whether it is a single-family home, commercial property, or vacant land.