When Is The Best Time To Buy an Investment Property in Colorado?

Purchasing an investment property is a great first step toward generating passive income and setting yourself up for long-term success. If you’re ready to take the leap and start looking at Colorado homes for sale, several considerations will influence your decision and its profitability. As a real estate broker and investor in Western Colorado, here are my tips to help you buy the right investment property for your goals.

You Have Clear Investment Goals

There are several different real estate investment strategies, and understanding which you want to pursue will help you purchase the right property type. With a residential property, you can turn it into a short or long-term rental. Alternatively, you can do a fix-and-flip, which involves buying an older house, renovating it, and selling it for a profit. On the other hand, you can purchase a commercial property and rent it to business tenants, such as an office building or restaurant. 

You Have Money in Savings

When purchasing an investment property, it’s essential to have a healthy amount of money in savings. Many government-backed loans aren’t available for investment property buyers, which means you’ll likely have to use a bank. Most banks require 20% down and at least three months of expenses in savings. You may want to have even more money set aside to handle property repairs and unexpected expenses. 

You Understand What Good Returns Look Like

Real estate investors know how to scout out a good real estate deal by comparing the purchase price to the average monthly rent for similar properties in the area. To ensure optimal profitability, you should be able to rent your property for 1% of the purchase price each month. Therefore, if the property cost you $300,000, you should be able to rent it for at least $3,000. While this monthly rent number may seem high, you must understand that you will likely spend about half of the gross rental income on operating expenses, such as repairs, property taxes, and property insurance. 

You’re Prepared For More Responsibility

Being a landlord is no walk in the park. You either have to take on more responsibility to maintain the property or set aside a portion of your monthly gross rental income to pay for a property manager. Even in the short-term rental game, fixing and flipping houses takes a lot of work. While real estate investing can help you generate more passive income, it’s still a job.

You Have a Team of Knowledgeable Professionals

Before you embark on your real estate investing journey, you must assemble your team. Start by finding a qualified real estate broker who can help you find properties for sale that support your investment goals. You also need a mortgage lender who specializes in second home loans for investment properties. Finally, once you own the property, you’ll need a property manager and a few contractors who you trust to make repairs.