Tag Archives: From the inbox

Colorado Springs, Economy, From the inbox

Is cash king in Colorado Springs?

There’s a common perception that, “Cash is King.” By this, it’s meant that cash tends to command a large discount.

Is that true in Colorado Springs?

Statistically not in December 2016.

There were 1,309 MLS listed sales for the month in the Pikes Peak Multiple Listing System (PPMLS) last month. Of those, 146 were cash. Of those 146, the average closing price to list price ratio was 98.3%.

Contrast that with VA loans for the same month, where the ratio was 100%.

Cash in December 2016 commanded a 1.7% discount.

Colorado Springs, From the inbox, Front Range

From the inbox: should I search on Zillow for homes?

Good question! The short answer is: Yes, it is a tool you can use in your home search. But it has a limitation. 

Zillow is a great platform for home searches and cannot/should not be discounted. However, there are a couple of things you should know when searching for homes in the Colorado Springs market.

Sites like this are fed from an IDX (Internet Data Exchange) via the MLS (Multiple Listing System).

awesome graphic from Rob
awesome graphic from Rob

In the case of Zillow, it’s also manually updated by homeowners, property managers and agents. However, Zillow is no longer automatically updated by the local MLS. The result is that it no longer represents the totality of the market.

It is a tool in the search, but I also recommend checking TheHousingNetwork.com (full disclosure, that’s my website) and/or PPAR.com to see the current listings in the Pikes Peak region.

If you’re looking to buy or sell a home in Colorado Springs, I’d be honored to earn your business.

From the inbox

From the inbox: what is an appraisal?

Good question! The short answer: an appraisal is an independent assessment of a home’s value. This differs from a home inspection, whose primary purpose is to assess the condition – not value – of a home.

The longer answer…Before You Buy: 4 Questions About Home Appraisals

Looking to buy or sell a home in Colorado Springs? Call Rob at 719-440-6626!

From the inbox

From the inbox: why is the rent still so darn high (in Colorado Springs)?

That’s a good question and opinions will vary.  The short answer: supply and demand.

The longer answer: we have a limited supply of rental homes and an app. 94-96% occupancy rate (recent anecdotal statements indicate it may be even higher). As a result, landlords can charge more for their properties.  But even this is as incomplete answer — it’s also a function of the economics of the purchase.

Say a landlord is looking at purchasing a home for app. $135K as an investment property (single family home).  This is a 3 bedroom home that will rent on average for $1106.  However,  the investor must put around 20% down due to the home not being owner occupied ($27,000).

Assuming $1100 a year for homeowner’s insurance and $650 for taxes, the mortgage payment on this home will be $717.38 (using the interest rate that I just recently closed an investment on).  If the home rents for $1106, the spread month to month for the investor is $388.62.  This doesn’t account for property management (10% or $71.74 a month) or maintenance (1% over a 10 year span) — call it $1350 for this home in a hypothetical year (or $112.50 a month).   Thus, the $388.62 margin is reduced to $204.38.

That’s the anatomy of a basic deal for an investor owned home and I hope illustrates part of the core reason behind pricing…and this was a $135K home.  The margins change as the price goes up without breaking the next rent price point (e.g., a $145K home won’t necessarily rent for more than an $135K home).

Looking to buy or sell in Colorado, I’d be honored to earn your business!  Call Rob @ 719-440-6626

**This is not financial advice, just a practical analysis of a purchase.

For Sale, From the inbox

From the inbox: why is rent so high!

Good question! Short answer: property and mortgage values and cash flow.

Longer answer: it’s a function of the dymanics of the city. As someone looking to buy rental property myself, here’s the analysis I use in looking at this. If you want to buy a $150,000 home, as an investment, you need 20% down. Let’s assume $1000 a year in insurance and another in taxes.

For investment purposes then, this home is going to cost a $30,000 down payment and at a 4.5% APR, cost a landlord $777 a month to pay principal, interest, taxes and insurance.

A landlord is going to need cash flow, too, to be prepared for emergencies and have a return on their investment. In this case, that $150,000 3 Bed, 2 bath home may rent for $1000 or $1050. This isn’t profit for the landlord, necessarily, as there are taxes and maintenance of the home involved, too.

It scales from there…a $175K home requires a 35K down payment (as an investment property) and costs $878 a month to carry in this scenario.

LARGE CAVEAT: This is for a 20% conventional loan, investment property. An owner occupied home will require much less down but have a higher overall mortgage as a result.

Looking to buy or sell a home in Colorado Springs? Please call Rob at 719-440-6626 or email me at rob@rtrcolorado.com.

*Reprinted with the permission of the party whom asked.