Investing in real estate in the State of Colorado is a wise and a highly lucrative decision. It does not matter if you are a new or a seasoned real estate investor. There are numerous benefits associated with this endeavor. These include owning an asset of a physical nature, and tangible returns. When you become a real estate investor, you have the potential to diversify the portfolio that you are building, earn a degree of passive income, enjoy numerous tax benefits that are associated with owning property, and best of all, your investments have the potential to reap the rewards of many tax benefits as a result of owning property. In addition to our investing guide these 10 steps to investing in real estate in Colorado can really help.
What Are the Different Types of Real Estate Investments?
If you have an interest in earning a passive income and securing for yourself a long-term amount of financial stability, you may invest in one or more of the following types of real estate investments:
- Short-Term Properties
- Mid-Term Properties
- Long-Term Properties
- Vacation Properties
- Flipping Properties
- Hacking Your Residence
- Commercial Properties
- Real Estate Investments
- Raw Land Properties
- Lease Options
- Crowdfunding
- Mixed Use Properties
- Private Notes
- Wholesaling
- Multifamily Investments
- And, More
Step #1: Decide on Your Objectives
If you want to build a portfolio that is successful as a real estate investor, you should start by determining your objectives.
Why is it that you want to have an investment property?
By outlining your objectives right at the beginning of the endeavor, you will be able to create for yourself a long-term strategy that will align with your end-result goals.
Step #2: Outline Your Budget
Before starting your real estate investing business, it is important that you know how much and what you are able to afford. You should outline your budget. While this sounds challenging, it is actually very easy. First, you determine how much that you are comfortable in investing.
For example, maybe you are comfortable with investing up to half of the wealth that you have or maybe you want to go on the low side and invest a quarter of your wealth – the choice is yours. Once you pick an amount, multiply that by 5 and calculate the total value you are able to afford. Remember, the bank will typically cover up to 80%.
Step # 3: Forecast Your Cash Flow
When you become a real estate investor, the main motive will be the monthly income that your property is going to generate. While it is true that you will generate positive cash flow, it is important to also remember the properties that you own will incur expenses. In some instances, there are expenses that COULD exceed the income generated by the properties that you own. You must prepare for this.
By considering all of the potential expenses associated with your investments, you will be able to forecast your profits on a general level. This will aid in ascertaining if you will actually be contributing to the goals that you have on a financial level or not. Mastering the art of forecasting your cash flow is imperative to becoming an investor that is savvy.
Step # 4: Choose the Investment Market
Once you know what your budget is, the next step you should take to become a real estate investor is to evaluate the different investment properties as previously outlined in this guide to determine which market is the one that suits the goals that you have.
You should analyze the various types of properties and their associated neighborhoods in order to find properties that will ensure a positive level of cash flow. Any property that you choose should – at least – yield a cash return of a minimum of 5% before considering.
Step #5: Get Pre-Approved for Financing
Once you have picked a desired real estate market, you should get pre-approved for any financing that you will need to purchase the property or properties that you have an interest in obtaining. You should secure a couple of real estate agents that will help you with recommendations, and getting a good deal.
You should know you will not negatively impact your credit score by getting pre-approved for the financing that you need. If the real estate market is competitive in the areas, you want properties, you will often find that sellers will prefer you to have pre-approvals or they will not conduct business with you.
Step # 6: The Property Search
Now that you have everything else done, it is time to start the serious level search for the properties that you will invest in. You should know that there are two ways of finding investment properties. The on-market properties and the off-market properties. Below, we have outlined a description of both:
- Finding Properties That are On-Market – The on-market properties are those that are listed by real estate agents on what is called the “Multiple Listing Service”. These properties are generally listed on websites such as Trulia.
- Finding Properties That are Off-Market – Finding Properties that are off-market are those that are not publicly listed on the previously-mentioned MLS. You may find these by looking for “For Rent” and “For Sale” signs posted in yards, by having ties with a property management company such as Pioneer Property Management and looking at Craigslist and the Facebook Marketplace. You may also discover these properties by going to investor gatherings, going through contracted wholesalers, Mailing to properties that appear to be neglected, cold-calling property owners.
Step #7: Submit Offers
When you discover properties that you have an interest in and the property appears to line up with the objectives that you have, you should make an offer The following tips will help you get your offer accepted by the property owner:
- Ask below the asking price.
- If your original offer gets turned down, wait two weeks. If it is still on the market, make your offer again.
- Send a letter to the owner that explains who you are and how you want to use the property. Give the seller a high level of confidence in you as a buyer.
- Do not get offended and do not be afraid to make another offer if your first offer is denied.
Step #8: Always Do Inspections
If your offer has been accepted, it is time to draw up a contract and be sure to include that the offer is pending an inspection. You should never give up the opportunity to have an inspection done.
An inspection is a positive move because it will help you prevent running into unexpected costs due to problems with the property. You should place a focus on using only licensed home inspectors when purchasing an investment property. These will provide a comprehensive report that provides information on the property – as a whole. Be sure to have the sewage system inspected, too.
Step #9: Secure Your Necessary Financing
Once you are ready to close, secure the necessary financing by having your hard credit inquiry done and setting up an appraisal to make certain that what you are paying is considered to be the value or under. You should never pay more than what the property is worth.
Step # 10: Closing on the Sale
The next step as a real estate investor is closing on the sale. This is the point where you will find that you are adding your signature to many, many documents. You may close in person or through a virtual meeting. Finding and investing in a new property is not at all easy; however, you can now get ready for the next phase of your investment; that is, collecting the proceeds from your new business! This is the truly exciting part of the process!
Contact Us
Becoming a real estate investor is exciting and profitable; however, it is a challenging endeavor. To take the work out of the process, you may sign on with a property management company, such as Pioneer Property Management.
While we specialize in Denver and all of the surrounding areas, we are considered a true asset to property investors all around the State of Colorado. We have a unique blend of expertise in the real estate market, we also specialize in many estate systems, and know about on-market and off-market properties that may lend to your success.
Our services vary immensely. It does not matter if you buy and sell or if you flip, or if you rent out properties, we can assist you with ALL of your real estate endeavors! We have provided over 15 years of zero evictions in terms of tenants. We offer a wide range of warranties. These include maintenance, zero evictions, tenant retention, pet damage protection, results first, and customer service. If you would like to learn more, you may talk to one of the specialists on our team now by calling the following number: 720-839-7482
