Anyone who has bought a house in Denver over the last ten years probably cannot understand how this could happen. Unable to sell a home occurs when high home prices collide with seven percent mortgage rates. In the previous ten years, buyers bid up home prices to the point where the average home price is almost $600,000 in Denver. The monthly payment on a $600,000 home with a 30-year fixed mortgage at a seven percent interest rate and 20 percent down went from $2023 to $3193, a 58 percent increase, forcing Denver into a buyers market for the first time in over a decade.
Sometimes Life Happens
Recent buyers who have to sell sometimes cannot sell their homes. They need to move because of a job change, or they get divorced or lose a loved one. They put their home on the market, and it did not sell. There are many reasons, such as listing it too high, dated kitchens and bathrooms, or poor curb appeal. Recent owners looking at commissions, time on the market, and fix-up costs realize they will lose money at the closing table. Since they cannot sell their home at the price they need, they decide to rent their homes instead.
Home Renting Risks
Owners need to look at the risks of renting. They also need time and attention to detail to protect their assets. Below are risks to consider before giving strangers the keys to the front door of their rental properties.
- Colorado Rental Regulations – Over the last three years, Colorado Legislators have passed many laws to protect tenant rights, some with significant penalties if not followed. New landlords must follow these laws.
- Rental Pricing – In 2023, Denver will have over 35,000 apartment units under construction, which, when completed, will increase inventory by about 12 percent. Landlords must brace themselves for a supply wave that will impact rental pricing. If the price is too low, the owner loses rental income; if it is too high, they may experience long-term vacancy with no rental income.
- Property Maintenance and Upkeep – Owners must maintain their units to attract and keep potential renters.
- Marketing – Vacancies in Denver are currently sitting around seven percent and are expected to exceed nine percent within the next two years because of the hefty development pipeline. Rental owners must be savvy marketers to keep their rentals occupied over the next two years.
- Tenant Screening – Screening is imperative to find decent, responsible renters. Recently passed laws make it more challenging to screen based on income, so landlords need to be aware of what screening questions are legal.
- Security Deposits – New owners must collect and manage security deposits correctly or face steep penalties in Colorado. Poor handling of security deposits is a common rookie mistake new landlords make.
Self-Management vs Hiring a Property Management Company
Rental properties are valuable assets that should be managed as long-term investments. Recent buyers contemplating renting may think property management is a breeze and go the self-management route—however, self-managing means taking care of all the risk factors mentioned above. There is no right or wrong answer because investing preferences and circumstances vary for each recent home buyer who decides to rent.
DenCO Property Management (DenCO) believes a strong lease lowers the abovementioned risks. Our residential lease agreement comes from a 20-year effort reviewed periodically by attorneys to ensure it complies with current Colorado real estate rental laws. Our agreement is straightforward but adaptable to the specific needs of each property by adding addenda. The lease lists the responsibilities of the tenant and the property management company during the rental agreement term. A well-managed property raises asset value and improves the enjoyment of the home, encouraging tenants to stay longer. Click here for more information about our lease agreements.
Hiring DenCO lowers rental risks and ensures that all legal processes are handled correctly and fully comply with all current state and federal laws. We manage 150 rentals in the DU, Washington Park, and other Denver neighborhoods and have been in business since 1999. Call us at 303-722-9688 or click here to complete a Contact Us form.
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