I fully believe that real estate is an excellent form of investing and can provide long-term generational wealth. My wife and I own short- and long-term rentals and feel proud to help others enter into real estate investing for their family or to grow their investment portfolios. Here are some tips on investing in the mountains.
Long-term rentals
Having affordable housing in the mountains is critical and an issue that is continuing to grow. To buy a property and provide affordable living options would be a win for the county and the local investor.
However, with high mortgage rates and higher-than-average home prices in mountain areas, finding the right property is a challenge
Run your numbers: When looking at a property to invest in and rent, here’s what you should consider:
Mortgage (if applicable)
Taxes
Insurance
Any one-time rehab costs
Ongoing repairs and maintenance allocation
Vacancy allocation
Landscaping/yard maintenance and snowplowing
Hot tub maintenance?
Building on vacant land
Buying land and constructing a new build can be a way to jumpstart an investment.
Permitting in the various counties in the foothills can be a real burden.
Estimates are around 18 months to 3 years to go from raw land to a new building.
What is your end goal for building? To live in it? To sell it? To rent it? To use as a short- or long-term rental?
If building to use as a short-term rental, make sure you are able to get a short-term permit in the county you are building (see below).
Run your numbers: When running your numbers, remember you need to factor in whether or not your property needs:
A water well?
A septic system?
Propane gas and/or electricity?
Road access and/or driveway?
Short-term rentals
Short-term rentals are all the rave and can be very lucrative, but counties in the mountains are attempting to put restraints on an over-saturated market
Every county has their own rules and regulations so it is essential (read: absolutely necessary) that we understand together the limitations placed by the county BEFORE you even begin to look at properties as it may directly influence your investing strategy. Check out the rules for each of these counties in the foothills:
If you determine your county allows you to get a permit, you must apply for (and pay and receive) a permit for operation BEFORE you begin renting your property. The permitting process can be months to a year.
The permit process will have you fill out legal and tax information
You will need someone local to be accountable for your property (a management company, a cleaner, a family member?)
The county may have you upgrade or improve your property based on their regulations.
Once you have a permit, what is your strategy?
Will you hire a management company? Will you run it yourself?
Do you have a cleaner or anyone local that can help with the property?
Will you use VRBO or AirBnB or booking.com or another? You will need some company to help with your bookings and paying taxes (unless you want to do all of that on your own).
1031 Exchanges
Once you own real estate investments and you’re doing well enough that you are ready to sell a property to upgrade into a larger or more profitable asset, you will want to save on taxes. A 1031 exchange, based on the IRS code, allows you to sell your investment property, reinvest the proceeds in a same or bigger property, and defer paying taxes on that sale. Read more about the 1031 Exchange process.
Let’s Get to Work
Investing in the mountains should be fun (and profitable). Let me help you run the numbers and figure out what best works for your investment vision.
