Invest Now. Thank Us Later. Build to Rent Homes Are Hot in Colorado Springs.
Colorado Springs has always been in the shadow of the Denver metro area – which is just about an hour south. However, Colorado Springs has been flexing its own housing market prowess according to its high national housing and investment opportunity rankings.
Located on the front range of the Rocky Mountains, Colorado Springs is one of the fastest-growing markets for selling homes. Currently, there aren’t enough homes for would-be homebuyers or for investors looking to add to their rental inventory. Along with the steady influx of new civilian residents every year, a growing military presence has pushed the Colorado Springs housing market toward rapidly rising rental rates and sale prices.
The pandemic shut down construction and permit requests in 2020, and now that the economy has opened back up, permits have skyrocketed.
- Construction permits in Colorado Springs have increased nearly 60%.
- Multifamily housing permits have spiked a mind-blowing 123%.
- Single-family construction permits have increased 34% from last year.
The State of Colorado Springs’ Rental Market
Known for its gorgeous mountain views and clean air, Colorado Springs is a great place for investors to buy or build rental property. Colorado is a popular place to relocate, which gives real estate investors an opportunity to buy income property in Colorado that can house a steady stream of renters new to the area. No doubt, the Colorado Springs rental market is sizzling. Rental prices have increased dramatically because of the city’s low inventory, high demand, and relatively low prices. The average rent of current leases across all rent classes has increased considerably – up 9.1% from May 2020. Occupancy has also increased from 95.1% to 96.1% in the past year.
Despite steadily increasing monthly rent, Colorado Springs remains a great area for real estate investors looking for real estate investment properties in Colorado. Now, demand for rentals is even higher as travel bans have been lifted, allowing residents to live their lives again and explore what Colorado Springs has to offer. Fresh air, hiking trails, rafting, historic sites, and more are pulling people to this city. Having a rental property in this area will likely draw potential tenants willing to pay top dollar.
The Pikes Peak region of the city, for example, has such a high renter demand that investors are seizing every opportunity to build apartment complexes. Between January and April 2020, the Pikes Peak Regional Building Department issued permits for 709 new apartment units. During the same period in 2021, 1,013 permits have been issued for new units – with more permits on the way. Rental properties both nationwide and in Colorado Springs have seen impressive price increases over the past several years. Nationally, rental properties have increased 3% from 2020. Colorado Springs, however, has tripled those gains with a price increase of 10.1% in 2021.
The city’s large military community contributes significantly to a large number of renters in the city. Colorado Springs is home to the United States Air Force Academy, Cheyenne Mountain Air Force Station, Fort Carson Army Post, Peterson Air Force Base, and Schriever Air Force Base. The military community has a $12 billion annual impact on the Colorado Springs economy and employs 105,000 residents with average salaries near $53,000. The city is also home to nearly 54,000 veterans and ranked as one of the top cities for veterans.
Investors are recognizing that single-family rentals and build to rent homes are lucrative investments opportunities in Colorado Springs because of the growing number of military residents who have solid income but don’t want to purchase homes for only a few years in a major seller’s market. Both types of rental housing cater well to the growing military population. Colorado Springs’s military community also contributes significantly to the city’s economic growth. The city is home to more than 240 aerospace and defense companies, with the defense industry representing 44% of the local economy.
Space, cyber, advanced materials, artificial intelligence, robotics, nanotechnology, manufacturing, and the interface between defense and commercial firms are a source of strength for Colorado Springs’ economy and provide a ready labor force for those transitioning out of the military and into the private sector. The combination of the military population, defense contractors, and related industries ensures a steady stream of qualified renters for any Colorado Springs investor. They can purchase or build rental properties in the area with confidence, knowing that the market will sustain solid ROI from increasing rent prices.
Colorado Springs is a great market for real estate investors despite the city’s limited inventory and inflated home prices. Real estate experts believe that investors should watch three specific trends.
1. Unemployment is higher than normal.
As of May 2021, the unemployment rate in Colorado Springs was 6.4%, compared to the national unemployment rate of 5.8%. Colorado Springs’ unemployment rate is slowly decreasing, and while it isn’t significantly higher than the national average, a higher rate could mean more residents may need to rent instead of buy in the short term.
2. Rent prices are increasing.
Apartments in Colorado Springs typically rent for $1,333 per month, while a single-family home for rent could cost renters around $2,256 each month. The average monthly rent in Colorado Springs has seen a nice increase from 2020, which means the appetite for rentals is strong.
3. Construction costs are up.
Lumber prices are finally starting to drop, but they still haven’t reached pre-COVID levels. As a result, home construction prices have increased considerably. While this is consistent with rising costs throughout the country, it means that newly built homes in Colorado Springs will likely be more expensive for the foreseeable future—again pushing would-be homebuyers toward renting for the short term.
Build to Rent is Outpacing Other Rental Markets
Build to rent real estate development has been one of the fastest-growing trends in the real estate rental market for several years, and the boom hit high gear last year. Nationally, build to rent properties increased 27% from 2019 to 2020 and the boom continues to accelerate. A great deal of investment dollars has been pouring into this industry. Build to rent is the #1 national real estate housing investment recommendation.
The rental market in Colorado Springs is almost as competitive as the homebuying market. A 2021 report from RentCafé dubbed Colorado Springs among the hottest rental communities in the country.
Colorado Springs is emerging as a small market for build to rent homes. With a large military presence, build to rent and single-family rentals are a great solution for military families stationed in the area for a long period and want a new, private home to stretch out. This is in addition to regular civilian interest in both markets. Overall, construction growth in Colorado Springs has increased 59% from 2020.
Tight housing inventory and increasing home prices have caused real estate investors to pivot toward build to rent strategies to add to their portfolios. Plus, with new construction financing so cheap, the value proposition on build to rent is too attractive when compared with other types of real estate investments like building new construction homes to sell, flipping homes, or buying existing home stock to build rental portfolios.
What Does the Colorado Springs Rental Market Mean for Investors?
Increased rental and economic conditions are helping Colorado Springs continue its upward climb as a hot spot for real estate investors.
A CommercialSearch report shows Amazon’s largest new industrial space expected to be completed in 2021 is a 4 million-square-foot distribution facility in Colorado Springs. The state-of-the-art fulfillment center will process customer orders. Recently, the tech giant said the facility is seeking to hire 2,500 employees and hopes to open in July.
This is just one indicator of how Colorado Springs is continuing to grow and flourish. Home sale prices and rental prices are rising steadily, demand is high, and employment rates are bouncing back. With the cost of living in nearby Denver spiking, many people – especially young professionals – are turning to Colorado Springs as a more affordable alternative. As such, it could be a good time to build or buy an income property in the area.
Furthermore, the more moderate price point for homes makes Colorado Springs a good starter city for newer investors on a limited budget. While some neighborhoods are more expensive than others, there are still deals to be had across the city as rentals and fix-and-flip properties. Besides, when scoping out properties, investors will get a chance to take in some of the most breathtaking scenery our country has to offer, and that alone is a good reason to give Colorado Springs a look.
While inventory might be harder to find, investors with strong real estate investment strategies can still profit. It’s now more important than ever to have a lender capable of helping you:
- Secure a loan with the best price and maximum leverage for your next rental investment
- Close properties quickly and certainly
- Run your construction or rehab projects smoothly
We are experts in financing new home construction for builders on urban in-fill, spec homes, model homes, teardown/rebuild projects and build to rent homes. Our team of experienced professionals will help guide you through getting a new construction loan for your next investment.
If you’re looking for better financing solutions than traditional hard money lenders in Colorado or are interested in obtaining a loan for investment property in Colorado Springs, Colorado, call us to learn more. Get started today and scale your rental property portfolio with Lima One, the nation’s premier lender for real estate investors.