As long as you’ve done your homework, taking on an investment property in Denver can be a very fruitful endeavor. While it can be tempting to leap at the first reasonable opportunity that presents itself, taking the time to consider your potential investment from different angles will help steer you toward a better and more profitable experience. Here are a few factors to consider.
Location, Location, Location
As real estate tycoon Harold Samuel famously pointed out, this can be one of the biggest make-or-breaks of your whole investment.
When evaluating a property, investigate the surrounding area. Good schools, low crime rates, and easy access to shopping centers, public transportation, and major places of employment make a neighborhood attractive to a wide cross-section of potential renters. To confirm that your property will rent quickly, take a look at neighborhood vacancy rates---low rates confirm the area’s desirability, while high rates indicate that you may have trouble keeping the property occupied.
Finally, consider how well the property you’re buying fits into the neighborhood. In an area where 3-bedroom, 2-bath properties are the norm, you may want to think twice about buying a 5-bedroom, 3-bath or a 2-bedroom, 1-bath. Both the rent and resale value of the larger property are likely to be influenced downward by the smaller surrounding houses, while the smaller house may not be suitable for the typical resident of a home in the area.
While a “fixer-upper” may sound like a fun project, keep in mind that major home improvement efforts almost always require more time and money than originally anticipated. If rehabilitating real estate isn’t a hobby of yours, be cautious when it comes to making this type of purchase.
When bargain-hunting, look for houses that need easy cosmetic upgrades, such as new flooring and refurbished cabinetry---and walk away from properties with major structural issues. Remember that in many cases, spending the extra money to buy a move-in ready home---even if you have to save a little longer to afford it---will end up costing you less money in the end. If nothing else, you’ll be able to generate cash-flow much faster, given that you’ll be able to quickly place tenants in the property.
There are a couple of things to consider when determining whether a property’s asking price will work for you.
First, if at all possible, avoid buying a Denver home that’s priced at the very top end of your budget. Whether investing for near-term cash-flow or for long-term appreciation, you’ll maximize your profits by minimizing the amount of interest you pay on a mortgage. Choosing a property that falls well within what you can afford will not only give you some breathing room if unexpected expenses pop up, it will put you on the path to owning your asset debt-free, the key to major earnings potential.
Second, when looking at comps, compare the price-per-square-foot of the house you’re considering to others with similar footprints. This can be a great way to find an underpriced property with room to add value through moderate upgrades.
Appealing amenities can be a big selling point when it comes to renting your Denver property quickly. Houses with vintage charm or striking modern design will likely rent more quickly than standard tract homes. Interior finishes are even more important. While renters expect paint and flooring to be in relatively new condition upon move in, kitchens and baths with tile floors and trendy cabinetry and countertops will be seen as a major plus by most prospective tenants.
Features such as home gyms, garages, laundry rooms and plentiful closets are the kind of “nice to haves” that can often seal the deal for many renters. Even for those who are not actively seeking out places with these features, if your Denver rental offers these and is a comparable price to others in the area then the seeking tenant’s logic turns to “Well, why wouldn’t I rent here instead?”
Let the professionals at the Bandy Team help you buy or sell a Denver home. Contact us for a no-obligation consultation. If you’re thinking about buying a home in Castle Rock, we can show you some terrific properties in Castle Pines, homes in The Meadows, town homes in Founders Village, and real estate in Castlewood Ranch.
Thanks to Dustin Henry of www.allpropertymanagement.com for contributing to this article. All Property Management is the largest directory of professional property managers. Real estate investors use the service to find property managers in Denver and many other US cities.