Risks and Rewards of Investing in Colorado Springs Real Estate - Article Banner

Do you know why you’re investing in Colorado Springs, and what you’re hoping to get from this experience? 

It’s important you know the answer to this question because buying an investment property and then renting it out to tenants comes with a lot of risks.

It also comes with a lot of rewards. The risks and rewards balance each other out, but you have to be prepared for them before you dive into real estate investing. There’s a lot of opportunity for long-term growth and high rents in Colorado Springs. You can establish a solid financial footing and continue to leverage the properties you own to buy additional assets. 

Real estate investing is a good idea when you know the market and you understand your goals.  

One of the things we’re always recommending is that you work with an experienced Colorado Springs property management company as you begin to navigate the investment options and the properties you think will make good rentals. Experienced investors understand their own risks and rewards. They also understand the value of good advice. 

As an investor, you’ll need to know what kind of rent you can expect. You’ll want an idea of how much you’ll spend on maintenance. There are laws and regulations to grapple with as well as the challenges of finding good maintenance vendors and marketing platforms. Surround yourself with professionals, and you’ll be a successful real estate investor.

Let’s take a look at some of the risks and rewards that can be found when you invest in Colorado Springs real estate. This should help you prepare for a smart start and even smarter growth.

Rewards for Investing in Colorado Springs Real Estate

It’s easy to summarize the rewards of Colorado Springs investment property. 

Basically: you make money on rent and property appreciation. 

There are additional rewards you should be aware of, however, such as tax benefits and leveraging what you have to grow a portfolio. 

  • Home Values are Going Up

The sales market is hard to follow lately. There have been unusual spikes and strengths, and we’re certainly dealing with a competitive market in Colorado Springs. More and more people are moving into the area, allowing the population growth to increase the number of renters looking for homes. 

Here, home values are high, and local real estate has been appreciating steadily over the last five years. That’s going to mean more value in your property the longer you hold onto it.

That’s a huge reward for owners, and an indication of that is how eager many people are to sell their properties right now. Increasing home values and growing appreciation are always investment rewards. 

  • Rents are High

With the growing demand for well-maintained rental homes comes an increase in prices. Rents in Colorado Springs and the surrounding areas have jumped over the last year, and they continue to go up. The local economy is strong and a lot of digital and remote workers are leaving more expensive cities to settle in areas like ours where there’s a higher quality of life and a lower rent threshold compared to those cities they’re leaving. A reward to investing in Colorado Springs real estate is that you can expect stable and increasing rents. 

  • Plenty of Tenants in Colorado Springs

This is a reward that’s hard to over-value. You can’t successfully rent out a property without a good pool of well-qualified tenants. We have that pool of tenants, and you’ll not have to worry about high vacancy rates. 

  • Tax Benefits to Real Estate Investments

You’ll reduce your tax liability when you own rental property. While you’ll need to declare the rental income you earn on your annual taxes, you can also deduct for things like mortgage interest, insurance and property taxes, Colorado Springs property management fees, depreciation, and maintenance. Talk to your CPA for some precise rules and requirements, but know that your tax bill will be smaller thanks to your rental property.

Risks to Investing in Colorado Springs Rental Properties

There’s your summary of the rewards of investing in a market like Colorado Springs, where you stand a good chance to make money on your rental properties. 

But let’s balance things out and make sure you understand the risks. There are always risks with any type of investment you make. There are no sure things. There are no get-rich-quick scenarios. 

Here’s what to plan for in terms of your risk.

  • The Colorado Springs Real Estate Market is Competitive

We’ve talked about the potential money that can be made with real estate, particularly real estate in Colorado Springs. 

But, this is a competitive market where supply is low and demand is high. You’re competing with a lot of other buyers for the best properties. You’ll spend more on your investment than you might have spent in a market with more inventory. Prepare for the risk that you won’t earn a lot of that appreciation right away. You’ll have to be willing to hold your investment property for the long term. Then, your investment property will be worth significantly more than it was when you bought it. And, you’ll have enjoyed years of tenants paying down your mortgage and covering your property expenses. 

  • Maintaining Rental Homes is Expensive 

You’ll need a maintenance budget and maybe a well-funded reserve fund. 

Most investors know that maintenance costs are rising. You may find yourself making repairs with a larger price tag than you anticipated. It may take longer to get vendors out to your property, especially if you don’t already have relationships in place. 

Before you invest in a Colorado Springs property, have a complete inspection so you understand your starting point. Talk to a property manager about the repairs and renovations that may be required to get it ready for the rental market. 

Invest in preventative HVAC inspections, roofing inspections, and an annual check of plumbing systems, electrical systems, and other functions at the property. This will cost you a little bit of money every year, but you won’t have to worry about large surprise maintenance bills over and over again on Colorado Springs investment homes.

  • You Have No Control over the Market 

The market is strong right now, but there will always be dips and dives. You have no control over the amount of rent the market will demand. You can’t do anything about competing properties. This can be risky for someone who prefers to control a lot of what impacts their money.

Colorado Springs Tenants are a Risk and a Reward 

Here’s the reward when we’re talking about the tenant pool in Colorado Springs: they’re often well-qualified. They’re diverse, they’re employed, and they are willing to pay high rents for the right property in the right location. They want and expect a good rental experience. 

Tenants are a reward when they’re well-screened and willing to communicate. Invest in good tenant relationships and you’ll have less risk with the people renting your property. 

Tenants in this market are willing to pay higher rents for things like:

  • Ideal locations with parking 
  • Proximity to schools, stores, restaurants, recreation, and entertainment
  • Modern upgrades and updates
  • Building amenities such as fitness centers and pools

Tenants want to move in with their pets, so pet-friendly properties in Colorado Springs are especially good investments. Make sure you’re willing to consider pets. 

Finding tenants often won’t be a problem when you invest in a Colorado Springs property. 

Those are the rewards of Colorado Springs tenants. The risks are the same as they are anywhere. Sometimes even a well-screened tenant might pay rent late. They might stop paying altogether. Tenants could damage your property, even unintentionally. There’s always the risk that their dog will bite a neighbor or cause a nuisance. 

You can manage the risks and rewards of tenants by adopting a great marketing plan, a consistent screening process, and an easy lease-signing system. When you’re willing to communicate, set expectations, and be transparent, your experience with tenants can be a good one and much less risky. 

Investing in Colorado Springs offers a lot of financial rewards. It’s also less risky than a lot of other investment types and investment markets. You’re earning consistent income and growing the value of your portfolio as an investor. 

Just make sure you understand the risks and the unknowns before you invest.

You might find yourself dealing with bad tenants who need to be evicted. It’s possible your property will depreciate faster than you expected. 

Understanding your potential expenses, knowing the local market, and working with qualified Colorado Springs property managers will help you have a successful investment experience that’s less risky and more profitable. 

Colorado Springs Property Management 

If you want to tip the balance away from risks and towards rewards, work with a Colorado Springs property manager. 

The property management partner you choose should never increase your risk. It should always be a reward – that you have a qualified, experienced resource who can leverage their knowledge, their vendors, and their understanding of rental laws in order to keep you and your property in excellent condition. 

With the right property manager on your side, you have a much better chance of enjoying the rewards of owning rental property. There’s a lot less risk involved in the entire process.

Good PartnerProperty management is a huge part of the equation. Get in touch with a good partner before you invest in Colorado Springs Then, you’ll understand the rental values, the maintenance costs, and the other particulars that come with owning rental property in this market. 

We would love to be your resource. Please contact us at Muldoon Associates.