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How To Find a Good Real Estate Deal in Colorado

By in Colorado Real Estate Market

Whether it’s your primary residence or a rental property, investing in real estate is a great way to build equity, reduce your overhead, and, ultimately, generate a profit. That said, if you want to increase the likelihood of profitability, you have to understand what to look for in an ideal real estate investment. Just because the list price is right doesn’t mean it’s right for you. Let’s explore some characteristics that make a real estate deal more intriguing.

Profitable Location

Look for real estate deals in places where people want to live and need housing. This ensures that you can resell or rent the property, whether you’re buying it as a primary residence or a rental home. Indicators of a quality investment location include:

  • Low crime rates
  • Job opportunities
  • Population growth
  • Nearby amenities
  • No zoning issues
  • Future developments
  • Safe from natural disasters

Low Listing Price

A low listing price almost always signifies an affordable monthly payment, not just for principal and interest. Most homes with lower listing prices also have lower operating costs and property taxes because they tend to be smaller, older, or need repairs. If they require updates, however, you must understand when a low listing price indicates substantial damage that costs more than the property is worth.

High Rental Income

If you plan to rent out the property, you must ensure the amount you can charge for rent is equal to or greater than your monthly payment. Look at the rental prices of similar properties and hold yours to the 1% rule. This states that the monthly rental price should be equal to or greater than 1% of the total purchase price. For example, if you’re looking at Western Colorado homes for sale and find one listed for $300,000, you would need to be able to rent it for $3,000 to ensure optimal profitability and a healthy reserve fund for unforeseen expenses.

Good Cap Rate

Capitalization rate (cap rate) is another metric you can use to determine the profitability of a rental property. The cap rate is a ratio between the annual rental income and the current market value of a property. Generally, you should strive for a cap rate between 8-12%.

Low Repair Costs

To save money upfront, you may want to find an investment property that needs repairs but none so substantial that they cut into your bottom line. Repainting outdated walls is easier and cheaper than redoing the plumbing. To learn more about which repairs are worth your time and money, check out my other blog post: Maximizing Returns on Your Home Improvements.

Start Looking For Real Estate Deals Today

Before you hop on Zillow or another property search database and sort from price low to high, consider contacting a local real estate agent in your desired area to help tailor your search to match your real estate goals. Maybe you want to purchase a home, live in it for a few years while you renovate it, and rent it out. Or perhaps you’re ready for a third or fourth rental property. No matter your real estate situation, a knowledgeable broker can find the best deal for you, and the best real estate deal looks different for everybody.

For more information about finding your perfect real estate deal in Western Colorado, contact me, Kayla Klein, at Western Land & Lifestyle Properties. I specialize in getting my clients the most bang for their buck!

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