Renters occupy nearly one-third of the housing units in Colorado, according to the U.S. Census Bureau, making investing in rental property a profitable venture. But before you can hope to turn a profit, there are a few things that you need to know, both about investing in Colorado real estate in general and what it actually means to be a rental property investor.
Landlord and Tenant Rights
The Warranty of Habitability Act is designed to protect the quality of Colorado’s rental properties. Landlords are responsible for making sure that a housing unit is generally in good repair and that plumbing, heating and electrical wiring are working properly.
The act even includes a clause that states “reasonable amounts of hot water must be available.” Tenants must keep their living spaces clean and promptly notify their landlords if any problem arises that makes their units uninhabitable.
State law also requires a landlord to give a tenant at least three days’ written notice before an eviction can take place. Community Housing Services offers a program to help Colorado landlords and tenants resolve disputes in accordance with the law.
Fair Market Rents
If you’re going to be a good investor, you need to do your financial due diligence before you start. The U.S. Department of Housing and Urban Development generates a report that lists fair market rents for specific areas all across the country, and they’re going to be different among Colorado cities as well. For example, fair market rent for a two-bedroom home is $849 in Fort Collins and $1,102 in Boulder. It’s worth noting that rents in nonmetropolitan counties, such as Phillips and Rio Grande, are significantly lower.
Vacancy rates can affect your ability to rent out your units. Go to Colorado’s official state website to find vacancy rates by market area. It lists Pueblo at 7.3 percent, Grand Junction at 7 percent, Greeley at 6.4 percent and Loveland at 5.3 percent. From 2001 to 2011, the vacancy rate for the entire state rose from 4.3 percent to 5.6 percent. Keep in mind that 2011 was an unusually strong construction year for multifamily housing.
There are tons of benefits to being a rental property investor in Colorado — the added monthly income being one of the biggest — and there are also tax benefits in place for you. However, as tax law can be downright confusing, you may want to consult an expert if you are new to investing in order to get the most out of your rental property investments. The most common landlord deductions are:
- Mortgage interest
- Advertising (your rental for rent)
- Professional Feeds
- Home office
- Cleaning/maintenance associated with the upkeep