Meeting about an assisted living facility we have under contract with a potential investor who has “8 million” currently earning a “guaranteed 5%”, the inevitable subject of overvaluation came up, to which my response was, not quite.
Buoyed by many positive trends, such as the nation’s first Olympic museum, projections of our being the nation’s cyber security capital, expansion of direct flights to and from the Colorado Springs airport and more, there’s also this:
Historically just a few years behind the Denver MSA, which may have plateaued as of this writing, it seems the Colorado Springs market has up to 5 years of upswing left.
Specializing in locating, analyzing, acquiring and management of quality rental assets, we are standing by and have significant experience helping investors build long-term wealth with real estate. Please contact us at 866-6REALTY or 303-242-2980 for the personalized attention you deserve.
Pre-foreclosure, Lis-pendens, default notice…these are not words any responsible homeowner wants to read or hear, no matter what. Suddenly faced with a loss of one’s home and often largest asset, a pending foreclosure is not a situation anyone wants or even should handle alone.
When faced with such a crisis, it’s important one engage the help of a qualified, licensed professional able to provide options that go beyond “we buy houses”. Including a short sale, lease options and more, armed with enough information, a true professional will find there many ways to help a homeowner in distress delay if not avoid a foreclosure, if only they’d ask early in the process. Unfortunately, and though most who receive a pre-foreclosure notice will find a way out, too many that don’t run out of time. No man is an island.
In one word, market conditions are robust. A proud member of Atlas Real Estate Group, the premier real estate investment company and brokerage team along the Front Range, I am often asked for an indication of the rental market in Colorado Springs. Here is a brief synopsis.
Market Conditions – Year over Year Rent Growth
At 11% according to Yardi®, we are top three in the nation when it comes to year over year rent growth, a finding consistent with what we see on a daily basis analyzing the market for our investor clientele. This is due to a myriad of factors, such as limited inventory, minimal construction activity and a level of population growth that has moved us up to being the nation’s 40thmost populous city and a “positive trajectory with respect to economic recovery and growth“.
Market Conditions – Supply and Demand
The result of our robust market is high prices. This is bad news for wholesalers and flippers, a business model needing margins of 25% or better to make sense. Forced to seek elsewhere for the short term ROI they need, many are flocking to markets such as Indianapolis, St. Louis and others where housing prices are low enough to generate the profit margins they need. And this is where the downside takes a sharp decline.
Stepping over dollars for pennies, their capacity for building long term wealth is severely limited, as can be seen by much lower rent growth rates of 4.3% and 2.9% respectively.
Not to mention, and though cash is truly king in the rental game, appreciation cannot be overlooked. According to NeighborhoodScout®, Colorado Springs has shown an 8% in annual appreciation rate in the last 12 months, whereas Indianapolis, IN and St. Louis, MO show 4.73% and 6.14% rates respectively.
Market Conditions – Seeking New Clients
How’s the market, you ask? Like Caribbean waters, warm and inviting. Come on in? Don’t worry, no sharks allowed.
We’ve previously discussed Return on Investment (ROI) about how much more (or less) than an asset’s cost it is (or will be) worth at resale. It went a little something like this.
OK. The same concept of ROI applies, perhaps but not always on a lesser scale, to the effect of improvements made after purchase to the resale value of that asset.
Many (not all) buyers want gorgeous granite, jacuzzi tubs, bedroom fireplaces and similar creature comforts. And where these add great value…prestige, will they amount to a dollar for dollar increase in financial value? It depends.
It’s never good to have the most expensive house in the neighborhood. First, they can stand out like the a Taj Mahal near Quonset huts. Gaudy is definitely not good, IMHO. Worst, pride in ownership can be a bitter pill to swallow when no one cares how much that Italian marble tub cost. When it comes to comparable values, a tub’s just a rub-a-dub-dub. Sorry, couldn’t resist.
Quickly. What is relatively worth more, adding attic insulation or a bathroom that will relieve congestion come school time? Before we tell it, understand you’ll recoup about 67% of improvements on average. Drum roll, please…
Attic insulation, by a long shot of 2:1. Sad but true.
Rehab Loans – Pennies from Heaven
So be careful what you ask for, you might not get it. Unless it’s help to pay for remodeling projects on that would be perfect home were it not for the host of improvements needed to make it your castle, whether necessary or not.
As an incentive for new and existing homeowners to buy homes with high energy efficiency ratings or make upgrades (furnace, insulation levels, windows, etc.) to an existing home, the state of Colorado is offering up to $8,000!
New or existing homes (existing homeowners OK)
Lender must reserve the incentive amount before closing
Energy upgrades completed within 120 days of purchase
Additional Down Payment Assistance Programs
There are hundreds, if not thousands of extra programs that help with adapting homes for folks with disabilities, down payment. closing and other costs. Check them all out here!
According to Investopedia, ROI measures the amount of return on an investment relative to the investment’s cost. To calculate return on investment, the return of an investment is divided by its cost with the result expressed as a percentage:
Real Estate ROI
Compared to precious metals (silver, gold), stocks and bonds, at 6.8% real estate provides the highest ROI on a national scale. Not to be confused with ROI, consider the Pikes Peak market saw a 8% increase in average sales prices from December 2014 – December 2015.
Make Money When You Buy
Not that it is risk free, but with variables such as appreciation, comparative property values, income history and such accounted for with relative certainty, in real estate it is said the money is made at the time of purchase, not so much at its sale. It is no wonder more millionaires have been made in real estate than anywhere else and with careful analysis, you could be the next!
With access to every home listed in the area, we analyze and maintain a database of properties sold as-is which include short sales, estate sales and bank owned properties available at all times. Just click the image to the left for your free download.
Thanks for reading. We look forward to serving your current or future real estate needs.
Mortgage rates continued lower today, largely getting caught up with yesterday’s underlying market movements. Lenders were likely being cautious due to prospects for volatility in today’s trading, not to mention the increased volatility seen on Tuesday and Wednesday. All things being equal, rates will
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