Investment properties in Colorado have become increasingly attractive in recent years due to the state’s booming economy and population growth. With Denver leading the way as one of the fastest growing cities in America, the demand for rental properties has skyrocketed across the Front Range and Western Slope. However, with high demand also comes challenges in finding quality investment properties that match your budget and goals. Here’s an overview of the best strategies for locating strong investment property opportunities in Colorado in 2023 and beyond.
Focus on Best Cities for Growth and Appreciation
The Front Range metropolitan areas of Denver, Colorado Springs, Fort Collins, and Greeley offer some of the best opportunities for investment properties in Colorado. These cities are experiencing rapid job and population growth, leading to low vacancy rates and rising rents and home values. Target newer neighborhoods on the outskirts of these cities that are drawing young professionals. Established neighborhoods closer to downtown may have less upside for appreciation but higher, more stable rental demand.
Look for Affordable Options on Western Slope
While the resort towns of western Colorado have seen home prices spike, more affordable investment property opportunities may exist in Grand Junction, Montrose, Durango, and other smaller western slope cities. These areas benefit from tourism, agriculture, energy, and retirees seeking an active outdoor lifestyle. Just be cautious of seasonal swings in rental demand in ski towns.
Take Advantage of Interest Rate Environment
Mortgage rates are expected to rise in 2023, making this a good time to lock in lower financing costs on a new investment property in Colorado. Leverage today’s rates to acquire a higher-quality property or one with more potential upside. But run the numbers conservatively, as higher mortgage payments reduce cash flow.
Factor In Property Management Needs
Colorado’s tight rental market makes property management a necessity for many out-of-state investors. Be prepared for 8-10% of gross rent payments to go toward a property management fee. Or opt for turnkey properties with management included. Also research landlord-tenant laws, as Colorado requires landlords to provide 48 hours notice before entering.
Explore Alternative Options Besides SFH
Single-family homes may be competitive for investment properties in Colorado’s Front Range. Also consider alternatives like condos, townhomes, multifamily properties, or mobile home parks which can provide higher yields. Just be aware of homeowners association fees and rules when buying condos.
With a booming economy and influx of new residents, investment properties in Colorado offer attractive opportunities but require thorough research and number crunching to identify the best options. Focusing on high growth cities, utilizing today’s rates, and exploring creative alternatives can lead to lucrative real estate investments in Colorado.