Thinking of converting your home into a rental property? Maybe you have the opportunity to buy an investment property. No matter the circumstances, owning rental properties in Colorado Springs provides numerous opportunities to build wealth and create a (mostly) passive income. The trick is knowing and having the right tools to succeed. As one of the top property management companies in Colorado Springs, we’re ready to share our wisdom. Here are a few things to consider when choosing to rent out real estate in Colorado Springs.
Your Guide To Rent Out Real Estate in Colorado Springs
Assess the Local Market
First things first, look at the market. Colorado Springs offers great opportunities for rental property owners. Knowing the local market, including narrowing down the specific location your property resides in, will help determine how well your property will do in the current market. Rents fluctuate and seasons play a vital role in how well a property does at a given time, so make sure to do your research. Check the area for other comparable rental properties and see what they’re renting for. This will provide the financial insight needed to make an informed decision. You can also reach out to us for a FREE Rental Analysis to see what your property could rent for in the current market. Our team will do the hard work for you!
Complete Any Repairs
Offering a well-maintained rental property shows prospective tenants that you care about the home and their needs. It also makes it more appealing. Nothing drives good tenants away like a run-down rental. So before you start marketing, have your property inspected for any maintenance issues that need attention. Check for both serious structural and safety issues as well as areas that need updating and address them. Colorado has a few rules regarding what makes a rental property safe and habitable. There are also certain upgrades and features that many tenants look for or expect to find in a quality rental. Both of those said, familiarize yourself with what’s expected and make the needed repairs or upgrades before finding tenants.
Have A Thorough Plan For Finding Tenants
Once your property is ready and your price point determined, it’s time to start looking for qualified tenants. Having a game plan in place before you throw both the physical and digit “For Rent” sign up helps streamline the process from start to finish. Make sure you have your approval criteria set and ready before collecting applications. Verify that they remain compliant with local, state, and federal laws. Colorado’s legal landscape with it comes to rental properties comes with a lot of protections for tenants, including what and when you can charge for application fees, the cap on the total income required for approval, as well as various protected classes regulated under Fair Housing. Be aware of these requirements and all others when setting your approval criteria. Have a streamlined process for collecting and reviewing applications. And when they do come in, make sure you have a way to complete all of the necessary checks to confirm the applicants are qualified. This includes a background, credit, and rental history check. Just remember that Colorado now allows tenants to provide their own screening report, so make sure to take that into account.
Brush Up On The Laws
Property management is a highly regulated industry. There are strict landlord-tenant laws that govern just about every aspect of managing a rental property and at nearly every level of government, too. From Fair Housing and Warranty of Habitability Laws to state laws pertaining to application fees, deposits, and posting demand notices; there are a myriad of laws and requirements that must be adhered to. And when it comes to these, ignorance is no excuse. Brush up on all of the local, state, and federal laws that apply to managing a rental. Make sure you also have resources available to keep up to date with any changes or new legislation that directly affects your investment. When in doubt, consult with a real estate attorney to ensure a thorough understanding of these requirements and more. And if you’d rather not have to navigate these legislative waters on your own, hire a property manager to help.
Talk to Your Insurance Agent
No one wants to think about what can go wrong while renting out your property. But you know what they say: be proactive, not reactive! Talk to your insurance agent to ensure you have the right coverage for your rental property, from coverage for tenant damage to lost rent. They’ll review your policy and help determine what’s right for you and your rental.
Budget, Budget, Budget
Homeownership can be costly. So, too, can owning a rental. For that reason, it’s important to budget for both the routine costs and the unexpected ones. There are many opinions and options on how much you should set aside for expenses, from calculating a budget based on the value of the property to setting aside a certain amount based on the monthly rent. The 1% rule involves setting aside 1% of the value of the property each year, so if your property is worth $300,000, you should set aside $3000 annually for potential maintenance costs and other expenses.
Compare this to the 50% rule and the 5xs rule, both of which calculate a total based on the monthly rent. The 50% rule is just that: setting aside half of the monthly rent towards expenses. While you won’t spend 50% of the rent on expenses every month, this method is a great way to set aside a substantial pool for emergency repairs or costly vacancies.
The 5xs rule may be more cost-effective when dealing with per-month calculations. Essentially, this rule takes 1.5% of the monthly rent and divides that by 12 to estimate the annual costs you might incur. For example, if your property rents at $2000/month, then with the 5xs rule, you should budget about $3000 per year for expenses. Divided by 12, this equates to setting aside roughly $230/month.
Setting a proper budget is extremely personal and involves a lot of fluctuating pieces, including mortgage and insurance costs, maintenance needs, and vacancy periods. Choose whatever method works best for you and your financial situation and goals.
Hire A Reliable Property Manager
Managing a rental takes time, knowledge, and commitment, all of which professional property managers have in droves. After all, it’s their job! Choosing a reliable property manager to handle the day-to-day management for you helps alleviate a lot of the stress that comes with DIY management. It allows you to reap the benefits of owning a rental property while freeing up time to focus on what matters most. Property managers are also local experts. They know the rental market like none other and have the resources available to stay on top of changes and trends. And while they cost money, the value they provide can be well worth it!
Real Property Management Colorado is geared towards providing just that. Whether you prefer a more hands-off approach to owning a rental or you just need assistance with the day-to-day, our team is ready to assist. Contact us today to learn more about our services!
When you have all of the right resources and preparations made, owning a rental property becomes significantly less daunting. And while every property and situation is different, it pays to prepare where you can. Make sure to do all of your research before jumping in and if you’re looking for expert advice, don’t hesitate to reach out to us! We’re ready to assist with all of your Colorado Springs rental needs!