If you are looking for a new location for your next income property in order to diversify your real estate investment portfolio in 2017, search no further – Colorado Springs is the right place for you!
Investing in Colorado Springs real estate offers great opportunities for both local investors and out-of-state real estate investing. Although it was one of the hottest real estate markets in 2016, Colorado Springs real estate investments remain still affordable which is an important advantage for investors.
The State of Colorado Springs Real Estate Market
It is enough to say that in the first quarter of 2016 Colorado Springs was ranked as the 11th hottest housing market in the US in order to catch the attention of existing and potential investors. This ranking is based on such crucial indicators as real estate appreciation, number of views of property listings, and speed at which listings are selling. The Colorado Springs real estate market continued performing more than well for the rest of 2016 with rising property prices and high appreciation rates, supported by the strong economy. Recent economic growth has been pushed by retail, health care, tourism, and professional and business services, which makes Colorado Springs’ economy more resilient than economies that are based on just one or two major sectors. As a real estate investor thinking about a Colorado Springs investment property, you will be happy to hear that the local economy is set to grow in 2017 and beyond according to a forecast by the University of Colorado Colorado Springs Economic Forum. The current unemployment rate (4.5%) is below the national average (5.2%), and job growth in the next 10 years is predicted at 38.3%. This means that more and more people of working age will be moving to the city, and many of them will be tenants looking for rental properties to rent before buying their own home. Thus, now is a good time for investing in Colorado Springs real estate to be able to provide rental options for the expected new migrants. Furthermore, other newcomers will be buying homes, pushing demand up, which in turn will result in an escalation in property prices. So once again, you should find your Colorado Springs investment property soon, before prices become unaffordable.
Related: How to Buy a Rental Property Using Mashvisor
Recent Trends in the Colorado Springs Real Estate Market
As Colorado Springs was developing into one of the hottest real estate markets in 2016, prices started going up, although they remained affordable, at least for the time being. Real estate appreciation is an important factor for any investor, not only those looking for long-term investments. Over the course of a year, a Colorado Springs investment property experienced an average appreciation of $18,500, for an appreciation rate of 5.9%, above the national average of $15,000. Meanwhile, the nine-year appreciation for Colorado Springs real estate investments ($65,500) was more than double the national average ($31,100).
As of most recently, in January 2017 new property listings dropped by 13.1% from January 2016, while sales went up by 7.5% over the same period. As a result, the number of active listings is down by 30.8% from a year ago. Many sellers, especially of lower-priced properties, receive multiple offers well above the asking prices, within days or even hours. As supply (of particularly cheaper homes) is running tight, demand for single-family homes (in more affordable neighborhoods) has reached historically high levels, according to the Pikes Peak Association of Realtors. All these are strong signals that even though the Colorado Springs real estate market might still be a buyer’s market, it is quickly changing into a seller’s one. This, subsequently, means that you should be investing in Colorado Springs real estate now as conditions will be getting less and less favorable for buyers of Colorado Springs real estate investments.
Related: 5 Ways to Find a Buyer’s Market
Colorado Springs Investment Property Figures
Following are the numbers for Colorado Springs real estate investments generated by Mashvisor’s investment property calculator, which eliminates the need to perform tedious real estate market analysis to obtain comps:
- Median Property Price: $266,000
- Traditional Rental Income: $1,310
- Airbnb Rental Income: $1,950
- Traditional CoC Return: 3.2%
- Airbnb CoC Return: 6.1%
- Traditional Cap Rate: 6.2%
- Airbnb Cap Rate: 9.3%
As mentioned above, affordability is one of the key features pushing the Colorado Springs real estate investments. The median price for a Colorado Springs investment property is significantly below the price in other hot markets, including Denver ($598,000) and Boulder ($1,017,000) in Colorado. The expected rental income is really good, particularly when you take into consideration the low property price. According to data from Mashvisor’s rental property calculator, Airbnb is the better rental strategy when investing in Colorado Springs real estate as it yields higher profitability in terms of CoC return as well as cap rate.
Related: Think Like A Rental Property Calculator: Numbers You Need To Know
Legal Issues for Colorado Springs Investment Property
Since Airbnb is much better for Colorado Springs real estate investments than traditional renting, it is important to make sure it is legal. In a 2016 report on Airbnb regulations in US cities by R Street Institute, Colorado Springs scored 0 because of the lack of legislation on Airbnb there, which means that an Airbnb Colorado Springs investment property is fully legal. You will need to pay a 2% lodgers’ tax and a 3.12% sales tax, but these levels are much below the rates in many other hot markets. So, if you are interested in Airbnb Colorado Springs real estate investments, start your search now.
Top Neighborhoods for a Colorado Springs Investment Property
To be able to buy a Colorado Springs investment property, you first need to know the right neighborhood. Let’s take a look at the real estate comps provided by Mashvisor’s investment property calculator:
1. East Colorado Springs
- Median Property Price: $235,000
- Traditional Rental Income: $1,120
- Airbnb Rental Income: $2,170
- Traditional CoC Return: 2.8%
- Airbnb CoC Return: 8.5%
- Traditional Cap Rate: 5.6%
- Airbnb Cap Rate: 12.0%
- Airbnb Occupancy Rate: 65.2%
The #1 neighborhood for an Airbnb Colorado Springs investment property is East Colorado Springs as it offers the highest CoC return and cap rate. However, this neighborhood is also good for traditional renting as it offers a quiet environment, homes built in the 1960s and 1970s, and some of the best schools in the district, which makes it perfect for families with kids.
2. Northeast Colorado Springs
- Median Property Price: $280,000
- Traditional Rental Income: $1,250
- Airbnb Rental Income: $2,700
- Traditional CoC Return: 2.6%
- Airbnb CoC Return: 8.2%
- Traditional Cap Rate: 5.4%
- Airbnb Cap Rate: 11.4%
- Airbnb Occupancy Rate: 43.0%
Another excellent neighborhood for investing in Colorado Springs real estate is Northeast Colorado Springs. Property prices here are slightly above the city average, but so is rental income. Once again, Airbnb is significantly more profitable in this settled neighborhood than traditional.
3. Southeast Colorado Springs
- Median Property Price: $180,000
- Traditional Rental Income: $1,070
- Airbnb Rental Income: $1,540
- Traditional CoC Return: 3.9%
- Airbnb CoC Return: 7.1%
- Traditional Cap Rate: 7.4%
- Airbnb Cap Rate: 10.9%
- Airbnb Occupancy Rate: 51.3%
The Southeast Colorado Springs neighborhood is highly affordable for Colorado Springs real estate investments, while Airbnb profitability is really good. If you are in favor of traditional renting, think about a Colorado Springs investment property in this neighborhood as that’s the area with the highest CoC return and cap rate for traditional in the whole city. However, you should hurry up as prices went up by 10.7% on annual basis.
4. Northwest Colorado Springs
- Median Property Price: $378,000
- Traditional Rental Income: $1,520
- Airbnb Rental Income: $2,530
- Traditional CoC Return: 2.8%
- Airbnb CoC Return: 6.8%
- Traditional Cap Rate: 5.5%
- Airbnb Cap Rate: 9.7%
- Airbnb Occupancy Rate: 34.4%
Northwest Colorado Springs is another excellent neighborhood for investing in Colorado Springs real estate. The median price is above the average for the city, which brings profitability down, but still at a very good level.
If you are looking for a hot, yet affordable real estate market to make your next income property purchase, check out Colorado Springs. A Colorado Springs investment property offers endless benefits to real estate investors.