You want to purchase a Colorado investment property but aren’t sure what would constitute a “good” investment property. In a competitive market, mistakes can be very costly, so knowing what to look for before you invest is imperative. The Denver real estate market is turning and there may be more room to buy investments soon!
One thing that is very important is the neighborhood. This is for many reasons that also factor into a good investment. Part of the neighborhood factor is the type of tenants you will get.
High end home? An executive rental will bring a good rent, but may mean a higher vacancy rate.
Near a college? You’ll get students, which isn’t necessarily a bad thing, but will again mean you most likely won’t have tenants during the summer months.
You get the idea. Look at who is living in a neighborhood to see if your target tenant is there.
Neighborhood will also determine things like property taxes, crime and schools. Property taxes are important to look at because while it may mean a higher value property that will attract long term tenants, it also means a bigger dent in your bottom line.
High taxes may hike rents beyond what tenants are willing to pay, which means that you are stuck with them out of pocket. Crime rates are kind of a no brainer. Who wats to live in a high crime area. Schools are important if your target tenant is a family with children as well as the overall value of the property. Bad schools will mean different tenants and lower value to your property.
Also look at things in the area surrounding the property, such as parks, malls, gyms, movie theaters, public transport hubs and all the other perks that attract renters. Also look at any future development. This could be a double-edged sword.
New apartment buildings, business parks or malls may mean a good growth area. New home developments may devalue your investment due to loss of green space and competition for your property.
Lastly find out what average rents are in the area. That should give you an idea of what you can ask in rent and will help you decide if what you will be spending in mortgage payments, taxes and such will put you at a loss or earn you money.