10 Reasons to Invest in Colorado Real Estate
Are you on the fence about selling or renting?
When it's time to move, some people think the only choice they have is to sell their home. However, hiring a property management team can help offer other options. Keeping a home as a rental is a great way to build equity and help diversify your assets. Compared to investors who rely only on the stock market or banks for their retirement, real estate investments take a different approach.
Real Estate offers:
- predictable cash flow;
- appreciates in value, thus keeping up with inflation;
- a higher return because of positive leverage;
- equity growth via debt reduction
Unlike Wall Street, which can be a mystery game for many, the National Association of Realtors reports real estate appreciation levels of 6% per year since 1968, this even includes the economic downturn beginning in 2007. The best part is, you don't have to learn real estate law or be the landlord.
1. Real estate has predictable cash flow.
Cash flow is the net spendable income derived from the investment after all operating expenses and mortgage payments have been made. A good real estate investment should provide you with 6% or greater cash flow.
2. Real estate appreciates in value.
Since 1968 appreciation for real estate have been 6% per year, including during the downtime in the economy beginning in 2007, according to the National Association of Realtors.
3. Real estate can be leveraged.
The most important advantage of real estate investing is leverage. It is the use of borrowed capital to increase the potential return of an investment. In real estate transactions, leverage occurs when a mortgage is used to reduce the amount of investor capital required to purchase a property.
4. Real estate provides equity buildup.
Most real estate is purchased with a small down payment with the balance of the money being financed through debt financing from a lender. Over time, the principal amount of the mortgage is paid down, slowly at first, and then more rapidly at the end of the amortization period. This principal reduction builds equity.
5. Real estate is improvable.
One of the most unique and attractive advantages of real estate is that it is improvable. Because real estate is a tangible asset made of wood, concrete, and glass, you can improve the value of any property with some elbow grease and sweat equity. You can make your real estate worth more money by improving it.
6. Real estate coincides with retirement.
When real estate is purchased, the cash flow is lower and the principal reduction on the mortgage is less. Over time, the mortgage is paid down or paid off, and the cash flow increases. In some respects, it's a forced savings plan, yeilding a greater amount as time goes by which is a perfect investment for retirement as it increases in cash flow down the road.
7. Real estate is tax deductible.
Tax codes allows various deductions for the normal expenses incurred in owning real estate, such as property upkeep, maintenance, improvements, and even interest paid on the mortgage. The deductions can offset income and reduce your overall taxes.
8. Real estate is depreciable.
Depreciation is a non-cash expense permitted by tax code that depreciates the value of your investment property over time. However, the value of your investment property actually appreciates. The depreciation deduction allows a real estate investor to generate a larger positive cash flow while reporting a lower income for tax purposes.
9. Real estate has a lower tax rate.
If your investment property has been sold after a year, the gain is subject to capital gains tax rates which depending upon your individual tax bracket is generally 15% or 20% which is usually less than one's personal tax bracket.
10. Real estate gains are deferrable.
Our tax code, under a 1031 exchange, permits the gain on the sale of an investment property to be transferred from the property being sold to a new property being purchased, hence deferring the payment of any tax on the sale of the property.
** The annual return on a $200,000 property with a $20,000 net cash flow purchased with cash is 10%. Now, let's assume a loan of $150,000 is amortized over 30 years at 5 percent interest, but 75% of the money required to purchase the property is borrowed, even factoring in the cost of making the mortgage payment, the annual return more than doubles to 22 percent. Once you have built up an equity position in an investment property, you can leverage that investment for cash in one of two ways: Secure a second loan against the increased equity or refinance the original loan amount plus the increase equity. This frees up money to buy another investment property.
New Water Wise Rules
ebinarsColorado Springs water wise rules were set by updates to the Water Shortage Ordinance, effective January 1, 2020. If you need additional information, please visit csu.org or call (719) 448-4800.
- Watering is allowed three days a week of your choosing Sunday through Saturday.
- Until May 1st, sprinklers can run at any time of the day. Between May 1 - October 15, sprinklers may run BEFORE 10 a.m. or AFTER 6 p.m.
- Do not allow water to pool or flow across the ground, street, or sidewalk. Also, leaking sprinkler systems must be repaired within 10 days.
- Watering is allowed any time with drip irrigation, handheld hose with a shut off nozzle or other handheld watering container.
- Customers who need to establish new lawns can request an establishment permit, avail. after April 1
Water-Wise Landscape Webinars:
Learn important lawn care practices and how to schedule your sprinkler system. Get customized advice on landscape care and maintenance, plant and grass selection, sprinkler system improvements, efficiency rebates, and more. Learn more here.
New Home, Better Living
When you’re house hunting, focus on the things that will improve your quality of life. There are so many factors that go into a home buying decision that it can make your head spin—especially if you’re in a competitive market where time is of the essence. The desire to purchase a property makes it easy to look past issues that could detract from your enjoyment of the home and cause some regrets down the road. That’s why when you’re weighing your options, quality of life should always be the top priority.
Location is part of lifestyle. Buyers often focus on “must haves” that can be added via renovation, but will downplay factors that are impossible to change. For example, if you work and spend much of your free time in the heart of a busy city, a house in the suburbs may mean more space for the same price, but it could also mean long commutes and a major hit to your nightlife. A centrally-located condo might be a better option.
On the other hand, if you’re a weekend warrior who looks forward to skiing, hiking, and mountain biking trips, living outside the city may be perfect—you’re that much closer to the trails when you wake up on Saturday morning. It’s a cliche, but it’s true: Location, location, location.
Big homes aren’t for everyone. If you love entertaining friends and family, a big house makes perfect sense. You’ll have all the space you need to prepare meals and throw big parties, and your guests won’t have any trouble finding parking.
But a big home also means more cleaning and maintenance—more lawn to mow, more bathrooms to scrub, more things that will break and need fixing. Before you dive into an alluring big home, consider your tolerance and enthusiasm for the upkeep. For some, a smaller home or a professionally-maintained condo are better options.
What to Repair Before You List
Giving your home a fresh coat of paint is one of the most cost-effective ways to spruce it up, and generally, it can be a do-it-yourself project. Make sure cover any walls with scratches and chips and consider updating any accent walls with a more neutral coat.
Hardwood floors are a very desirable feature in a home, so you want to ensure they look their best by fixing scratches or dull areas. If your carpet is worn or stained, consider replacing them. And don’t forget the tile in your kitchen or bathrooms. Re-grouting can go a long way in making dingy tile work look brand new!
Refresh the landscaping.
Show buyers your home is the full package by dressing up the outside as well as the in. Clean walkways and driveways, plant seasonal flowers and plants, trim hedges and trees, install outdoor décor pieces and fill in mulch and gravel.
Fix your fixtures.
Leaky faucet? Rusted drains? Loose drawer handle? Making these small fixes can make a big difference to potential buyers with detailed-orientated minds. Improve your kitchen. An outdated kitchen can be a real eyesore in a home. Updating cabinetry, repairing or replacing countertops, and installing new faucets and sinks may be worth the investment.