Is Now a Good Time to Invest in Colorado Real Estate?

For many people searching for a second home right now, it seems there isn’t enough supply to meet demand. So is it worth getting into a bidding war over your dream vacation home?

Increased demand for Winter Park real estate creates a seller’s market, which Colorado has been experiencing since 2020. Predictions show it will continue to be a seller’s market well into 2021, with no indication the real estate bubble will burst. 

Reasons to Purchase Winter Park Real Estate

If the sun, mountains, and lakes aren’t reason enough to purchase Winter Park real estate, we have some statistics to help you make a decision regarding this type of investment.

There are numerous signs of a potential return on Colorado real estate. You could use it as your full-time residence, or perhaps more rewardingly, a second home that can act as a rental property when you’re not in Winter Park, eventually garnering a profit when sold down the road. Colorado real estate prices have been rising steadily, so if you buy now with the historically low mortgage rates, you can take advantage.

According to Mashvisor data, the median purchase price of Colorado real estate is $688,643. There are a number of variables to used to calculate a mortgage on a home at that price, but let’s consider this scenario:

  • Purchase price: $688,643
  • Interest rate: 3.1%
  • Mortgage period: 30 years
  • Estimated monthly mortgage payment: $2,941

The following data shows what you could expect when you use the home as a rental in the current 2021 real estate market:

  • Potential rental income (monthly, using a property management company, which takes about 10% of the monthly rent): $2,193
  • Potential Airbnb rate (daily): $219
  • Potential Airbnb occupancy rate: 60% — This means you could expect to have about 18 of 30 daily rentals, totaling $3,942.
  • Potential Airbnb rate (monthly): $2,966 — This rate is less than the daily rental rate at 60% occupancy because homeowners often give a discount for renting days “in bulk” via Airbnb. It’s a nice incentive to promote long-term bookings.

If your home is going to serve as a rental for part of the year, you can use a property management company to handle the day-to-day service and maintenance. Additionally, property management companies can list homes for free on Airbnb, and the potentials guests/renters will pay service fees on their end. A property management fee is often less than that charged by Airbnb or other vacation rental companies, so it can be worth looking into.

Price-to-rent ratio: 30 

  • This number indicates whether it’s cheaper to rent your property or use it as your primary residence. The price-to-rent ratio is calculated by dividing the median home price by the median annual rent. 
  • 1-15 = better to reside than rent
  • 16-20 = better to rent than reside
  • 21+ = MUCH better to rent than reside

Using the median home price, and the monthly rental rate for Airbnb information collected here, you could estimate the price-to-rent ratio at 19 for a $688,643 home. This is research that you can share to help others decide whether they should invest in their own vacation home, or simply rent yours. A score of 19 is in your favor as a homeowner in Lakota Park, as it signals to others that now it is better to rent than buy which, needless to say, greatly benefits second homeowners.

With these statistics, it is encouraging for those looking to invest in Winter Park real estate vacation homes as a source of supplemental income. You’ll have the benefits of a lucrative rental market when you’re not using the home yourself. And when you make time to get away, you’ll love having access to all the fun and amenities offered in Winter Park, Colorado.

Shift to a Buyer’s Market in 2022

Experts are estimating we’ll see a subtle shift to a buyer’s market by 2022. This will be, in part, because of a predicted increase in mortgage rates, which are currently at an all-time low. We may see a jump from 2.65% (January 2021) to 3.6%. And with many people selling and buying now to take advantage of the lowest rates in 50 years, there may be less demand in 2022. While there may not be more inventory next year compared to this year, it will feel like buyers have more choices since there will be less competition for what is available.

So, you could invest now and take advantage of rental opportunities to start covering some of the expense of your second mortgage, or you could wait until 2022 when we have higher rates but fewer bidding wars. Either way, we hope you’ll end up in Winter Park, Colorado sometime in the future! If you have any questions, give us a call at 970.531.2345.