Investing in Summit County Real Estate
One of the most common questions potential Buyers of Summit County real estate have has to do with the rental income potential of investment property in the area. Below you will find some general investment property guidelines and specific investment property case studies.
Investment Property Case Studies
- Breckenridge Investment Property : Breckenridge is by far the largest segment of the Summit County Colorado real estate market. With a number of summer events sponsored by the town of Breckenridge, it also leads the rest of Summit County in terms of investment property sales. One of the better rental condo locations (on a purchase price to rental income basis) in Breckenridge is Beaver Run Condo. Beaver Run has a ski-in/ski-out location, over 400 individual condos in a wide variety of sizes and price ranges, and rental income averages are always easy to obtain.
- Keystone Investment Property : Keystone is home to the largest conference facility in Summit County which also helps increase the rental income potential of properties here during the off-peak times of the year. Another attraction of Keystone to potential Buyers is the fact that many of the properties here have the rental management and home owner's associations under the umbrella of one company; Keystone Property Management. This allows for a convenient "hands-off" experience for investment real estate owners in Keystone.
General Short Term Investment Property Guidelines
The phrase "short term" means those investment properties being rented to tourists. Any rental agreement involving a lease will be covered under "Long Term Rental Investment Guidelines" below. These are GENERAL guidelines. Every property type, price range, location, etc. will have variations and the guidelines below are intended only to help one to start their understanding of the Summit County investment property market.
- The closer a rental investment condo, townhome, or home is to a chair lift, the higher the rental income will be. The reason for this is that the ski season is the peak rental season and people put a premium on convenience. Ski-in/ski-out investment properties out perform those that are within walking distance to the chair lifts. Those within walking distance out perform those that require a shuttle ride. And those on the shuttle route out perform those that are not.
- Within a given price range, condos tend to out perform townhomes which in turn out perform homes. This guideline is related to the one above and has to do with proximity to the chair lifts. Another component of this guideline is the onsite amenities like hot tubs, pools, exercise facilities, saunas, steam rooms, tennis courts, conference facilities etc. which are more plentiful with many condo complexes than other property types. A common exception to this guideline includes large high end homes, especially if they have ski-in/ski-out access.
- For a GOOD investment property, gross rental income is typically between 5% and 10% of the purchase price.
- Rental management companies typically charge about 35%-45% of the gross rental income as their management fee. This is a general guideline and every rental management company has different fees. If an investment property has an on-site front desk or if it is managed by Keystone Property Management, the percentage paid to the rental management company will typically be higher. Also, many rental management companies have "deep cleaning" fees every 3 or 6 months and a whole range of various other charges such as kitchenware and/or towel and linen rental. There are also a number of rental management companies which charge less than 40% of the gross rents as their fee and this is particularly common among those which handle $1 Million+ single family homes. Prior to buying any investment property, one should make sure they completely understand the rental management agreement.
- Of course you can use your investment property! Most rental management companies require a certain amount of notice if you would like to not have your property rented and use it yourself. 30 or 45 days is common. But, if your property is not rented, most rental management companies will allow you to block out time at the very last minute as well.
General Long Term Investment Property Guidelines
The phrase "Long Term" means any rental scenario which requires a lease, be it for a month, a year, or any other period of time.
- The lower the price per square foot, the better the property will be as a long term rental investment property. Good long term rental properties are in many ways the exact opposite from good short term rental investment properties. For long term rental properties, the best investments are in those properties that have the most space for the lowest price. This means that they will not be located the most conveniently located areas. One notable exception to this guideline would be properties to be leased for the summer months to retirees escaping the heat elsewhere in the country.
- Most people manage long term rental investment properties themselves and rents of $500 to $1500 (note the exception above) per month per bedroom are common, depending on the property. One of the best sources for finding tenants, as well as further information on the long term rental market for a given property type/size/location/etc. is www.SummitDaily.com in the Classifieds section.