Tag Archives: Investment Properties

Mistakes Newbies Make with Real Estate Investing

When investing in Colorado real estate, avoid the stock market mentality. Buying a Colorado home to turn into a rental property isn’t a get-rich-quick strategy, but a long-term approach for building wealth and passive income.

With real estate investing fever and a hot rental market in Colorado, it’s easy to get carried away. Just as the stock market doesn’t behave the same way over the decades, the housing market is also unpredictable. By working with a solid property manager and choosing the right Colorado home that draws a reasonable market rent off the bat, you avoid some of the real estate investing nightmares.

Buying a home you hate

Don’t buy an investment property if it’s a home you would not personally want to live in for at least two years. Oftentimes, investors save on capital gains taxes by moving into their rental homes for at least two years before selling. On other hand, the home has to appeal to renters. The goal is to avoid high tenant turnover with an attractive property that can produce passive income for 5 to 10 years or longer.

Going into it without cash reserves

Another common mistake is to take out money from retirement accounts to put the 20 percent typical down payment on an investment property. Oftentimes, investors don’t keep enough cash reserves. Make sure you have enough money for basic costs such as property management, maintenance and a few large expenditures such as A/C replacement.

Forgetting it’s a business

Owning a rental property in Colorado is a business. Even if you don’t want to play the “bad guy” when collecting rent or enforcing a lease, treat your Colorado real estate as though it’s your business. A good property management company helps you stay on track. After buying your first rental property, consider investing in more. Give yourself at last a year or two to make sure your real estate investing plans are successful.

According to a piece by forbes.com, investors often make renovations that don’t pay off in the long-term. Avoid the urge to constantly upgrade. Consider hiring a professional interior designer before selling or renting out your home. As an investor, rely on other people to help you reach your goals.

If you are interested in learning more about purchasing investment property in Colorado contact the experienced real estate agents at Housing Helpers of Colorado to learn more.  303-545-6000

Crowdfunding Colorado Real Estate Gaining Traction

Looking for capital to invest in Colorado real estate?  Consider crowdfunding.

If you’re unaware of the term, crowdfunding is a means of raising money for a project by seeking contributions from a large number of people. It’s been popularized online with websites like Kickstarter.

That’s not to say that crowdfunding a real estate investment in Colorado is for everybody. The minimum capital required, as of this writing, starts at $5,000. For some properties, it can go much higher.

Still, with crowdfunding, the real estate investor risks less money. Of course, that lower risk also results in a diminished return.

Broadmark Capital oversees funds that are used to lend money to real estate investors. One of those funds has a focus on metro Denver.

The company recently used RealCrowd, an online crowdfunding platform similar to Kickstarter, to connect investors with capital.

Adam Fountain is a managing director at Broadmark. He said that, using RealCrowd, the company raised $3 million for one fund in just 3 months. That’s money from brand new investors that the company would not have been able to raise otherwise.

Broadmark also raised $5 million for a second fund and has turned to crowdfunding to reach its goal of $50 million.

As of this writing, Broadmark loans are supporting more than a dozen projects in the Mountain West, including homes in North Denver and Milliken. It should be noted that these are “hard money” loans and are offered with a heftier price tag – a 12.5% interest rate. That’s significantly higher than a bank loan given the current yield on the 30 Year Treasury.

Broadmark typically requires investors in its fund to pony up at least $100,000. However, with the use of RealCrowd, the company was able to lower that limit to $25,000.

Joshua Dorkin is the CEO of the online real estate community BiggerPockets. He said small-scale operators are interested in crowdfunding, but that interest is limited because of the headaches associated with dealing with multiple investors on a small project.

It’s also possible that unsophisticated investors, lured by the possibility of a positive return with minimal investment, might lose money on bad deals, he said.

Purchasing investment property in Colorado can be complex, consider working with a Colorado real estate agent with Housing Helpers.  Our realtors know the investment market as well as the rental market to help you understand all of your options both before and after the purchase.

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