As the rental market in Colorado continues to evolve, property managers and investors are facing a variety of challenges that make it harder to maximize returns, protect their investments, and limit their legal exposure. Recent state legislation, rising costs, and market shifts have created a more complex landscape for property owners. Here are some of the most pressing issues:
1. Harmful State Legislation Impacting Property Owner Rights
New laws aimed at tenant protections are impacting property owners' ability to manage their investments. These include limits on security deposits, longer notice periods for rent increases, and stricter eviction procedures. While these measures are designed to support tenants, they are poorly written and hard to implement, These measure also add to the operational burden on property managers and reduce the flexibility of landlords to adapt to market conditions. This legislative trend is shifting more control away from property owners, making it more difficult to navigate common issues and maintain profitability with no relief in sight.
2. Rising Property Insurance Costs
Insurance premiums for rental properties and homes in general in Colorado have been on the rise, particularly due to the increasing frequency of natural disasters and major weather losses. This added cost is cutting into investor margins, and there’s often little they can do to offset the burden. Additionally, the rising costs are unpredictable, making it harder to plan and budget long-term.
3. Increasing HOA/Metro District Dues
Many rental properties, especially those in newer developments, are part of homeowners associations (HOAs) or metro district(s). Recently, dues have been climbing, further increasing the monthly costs for property owners. Metro district dues are particularly concerning, as they can be unpredictable and often accompany other municipal taxes, adding a layer of complexity for property managers trying to keep costs in check.
4. Rising Property Taxes Tied to Inflated Home Values
The sharp rise in property values across Colorado has led to a corresponding increase in property taxes. While higher home values can be beneficial when selling, they present a financial challenge for investors holding rental properties. Rising taxes erode profits, and property owners often face difficulty passing these costs on to tenants due to local market competition.
5. Increased Labor Costs
Since 2020, labor costs have nearly doubled, driving up maintenance and repair expenses. Whether it’s hiring a plumber, electrician, or general contractor, the surge in labor costs has significantly impacted budgets for property upkeep. This added financial pressure means property managers and owners are paying more for essential repairs, further squeezing profit margins.
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What Can You Do to Combat These Issues?
While these challenges are daunting, there are proactive steps you can take to protect your investments and manage your rental properties effectively:
1. Reevaluate Your Portfolio
If you have underperforming Class B or C condo/townhome in secondary or non-primary market, it may be time to let them go. Properties that aren’t generating strong returns or are located in areas with lower rental rates can drain resources. Consider selling these assets and reallocating capital into better-performing markets or properties with stronger long-term growth potential.
2. Build Strong Relationships with Trade Contractors
Labor costs may be rising, but building solid relationships with reliable contractors can help mitigate some of these expenses. By establishing trust and consistent work with electricians, plumbers, and general contractors, you may be able to secure better rates and priority service. These relationships will be invaluable when repairs are needed quickly and cost-effectively.
3. Get Involved in the Next Election Cycle
Legislation has a direct impact on property owners and real estate investors. To protect your rights and interests, it’s important to stay informed and engaged in the political process. By voting and advocating for policies that support property owner rights, you can help influence the future of real estate legislation in Colorado. Don’t hesitate to connect with local groups or organizations that represent landlord and property management interests.
4. Hire a Professional 3rd-Party Management Company
The laws surrounding property management are constantly changing, and staying on top of every new regulation can be overwhelming. A knowledgeable, skilled, and professional third-party management company can help protect your rights and keep you compliant with evolving legislation. Look for a management company that is actively involved at the state capital and keeps up with the latest laws to avoid putting yourself at risk of legal action for non-compliance. Don’t be fooled into thinking you can manage it all alone—having expert guidance is essential to avoid liability.
In combination, these strategies can help you weather the current challenges and come out ahead in the long term.
If you're facing any or all of these challenges and need guidance, don’t hesitate to reach out! I'm here to help you navigate these obstacles and protect your investment.
-The Real Estate Shark
