Investment Blog

Real Estate and IRA's

You might not realize it, but an IRA can invest in real estate instead of stocks and bonds. The rental income generated by IRA owned real estate, plus any profit from sale all goes right into your IRA just like dividends and gains from stocks or bonds. Your IRA doesn’t even have to have the entire purchase price of a property; the IRA can partner with a person, company/entity, or another IRA, or it can secure a non-recourse loan to buy real estate.

Since our clients are often unaware of the process for buying real estate with their retirement plan, we created this special 11 page report to help. Please download the report and/or submit questions about either the real estate purchase itself, or the retirement plan rules and process. We have arranged for the Self-Directed IRA specialists at New Direction IRA to answer questions about account processes and IRS rules while we are available to help with finding and choosing a property.

Of course, we are always happy to help with any real estate purchases you might have in mind, with retirement funds or not.

2018 Tax Cut and Jobs Act

The tax bill for 2018 has many aspects that affect the real estate industry.  There are points that affect Homeowners, Commercial Real Estate, Investors, Real Estate Professionals, and the decision to rent or buy that first home.  This article from the National Accosiation of Realtors breaks down the basics.

National Association of Realtors Tax Reform Explained

2017 Boulder Real Estate Investment Wrap-Up

The past few years have been slim pickings in the Boulder multi-family market.  In 2017 there where 12 on market sales, and 4 buildings sold then entered into the MLS.  There were of course several off market sales such as 1707 Walnut St, a 44 bed property that sold for $15.6m, and 956 Marine, a 14 bed property that sold for $3.1m.

It's tough to get reliable information from a small data set like 16 multi-family listings, but we can get related information from the single family and condo markets in Boulder.

The median home price for a single family home in Boulder increase 2.4% in 2017 over 2016, and inventory was slightly up by 6.8%.  In the condo market we saw a 15.4% increase in inventory, which led to a 3.6% decline in the median values.  These numbers are significantly lower than 2016 over 2015.

Boulder is not seeing a bubble, however, one factor to a bubble is affordability.  At the end of 2017 the median income would not qualify to purchase a median priced home within the city limits.

These numbers were derived from MLS data, and as we know this information may not be complete.  Here are the average per bedroom rents, caps and GRM’s for the year.

Average rent per bedroom:  $883
Average Cap Rate:  4.4%
Average GRM:  18.9

Boulder Multi-Family Investment Snapshot


2016 Year to Date there have been 10 multi-family properties sold in the City of Boulder.  Here are the quick stats:

Duplex’s:     4
Triplex’s:     4
6 Unit:        1
31 Unit:      1

Average days to offer:     51
Median days to offer:      7.5

Average Price Per Bedroom:    $151,600Average
GRM(Gross Rent Multiplier):    18.05

Data from IRES MLS-Deemed reliable but not guaranteed.

Tax Deductions for Rental Properties

for rent

It’s tax time, so it’s a good time to know what tax deductions are available to rental property owners.  This is a good article that gives you the basics and links to the related IRS publications.

550 W 3rd St Nederland - SOLD

We listed 550 W 3rd St in Nederland on June 18th and had it under contract in 37 days.  This investment property had 6 efficiency units averaging 260 sf in a central Nederland location close to downtown and the RTD PnR.  It sold for $480,000 with annual rent of $47,640 producing a GRM of 10.47 and an actual cap rate of 6.28%.

During this process we had several more buyers for Front Range income property, if you are thinking of selling please give me call.  

Outdoor Space

Income Property Refinancing

With income producing property we are constantly trying to find ways to increase income and reduce expenses.  Refinancing a leveraged property at todays very low rates can be a great way to increase that income.

Lets say you have a loan on your duplex of $400,000 with a $300,000 balance, and this loan was at 5.25% amortized for 30 years.  Your current Principle and Interest payment is $2,208 a month.  If you refinanced that $300,000 at todays rate of 3.75% your new monthly payment would be $1,389 month.  This would be $819 month or $9,828 in additional annual cash flow.  If your current rents are $4,000 month this would be an effective increase in income of about 20%, without raising rents.

However, you do have to consider the cost of the loan.  If the loan fees add up to 1.5% + closing, recording, title fees you could be looking at an approximate cost of $5500 to get the deal done.  That said you would not realize this effective increase until month 8 of the loan.  Always balance the time you expect to hold the property with cost to refinance.

If you would like lender referrals that work with investor properties please give me a call.

Parents, Should you Rent or Buy for your CU Student?

College is a very expensive proposition these days, tuition even for in-state schools has been on a meteoric rise over the past ten years.  And this is only the start.  Rents are hitting all time highs and it could cost over $1000 month just for rent.  Wow, $48,000 just for rent while your child is at college, and that’s just the first four years.  

With a high school sophomore I too am starting to think about the best way to manage these expenses.   If you have a son or daughter attending the University of Colorado Boulder you do have options.  You could rent, or for some buying might be a great option?

Rent alone at the average price per bedroom of about $900 per month, is $10,800 per year.  In rough numbers a $210,000 2 bedroom condo would run just over $900 a month for PITI with 20% down at todays super low interest rates on a 5 or 7 year ARM.  Your son or daughter would then rent the other room to a friend which could come close to covering the mortgage.  Appreciation, cash flow, and equity build-up could save you thousands of dollars over a 4 year college career.

Here are a couple examples given the 20% down payment, current interest and rental rates:

2 bedroom condo with a purchase price of $210,000 would save approximately $21,000 by the end of the 4 years.

A 3 Bedroom single family home in Martin Acres close to campus would run about $450,000 and could net you about $86,000 over and above the cost of 4 years of rent. 

It’s best to look at each individual investor and determine their needs and look for a property that best fits those needs.  If you would like to learn more and work through a scenario that fits your specific requirements, please contact me at 303-579-2694 OR EMAIL ME HERE.

College Town Real Estate Investing

By Kevin Schill

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Boulder Colorado was just voted #1 college town in the U.S.  According to the Bureau of Labor Statistics Boulder’s unemployment is at 2.9%, tied for the 13th lowest metropolitan area in the country.  Google is planning a major expansion at Pearl and 30th in the heart of Boulder, they are looking to add 1500 new jobs.  Apartment rental rates on the Hill are jumping approximately 6% for the coming 2015-2016 school year.  And lets not forget the CU Engineering Dept. expansion by 2020.

The Boulder County economic forecast is looking pretty solid, and it’s a great time to own real estate especially income producing rentals.  Real estate appreciation may slow a bit in the next 2 years from our 10%+ increase this past year, but the upward trend will certainly continue.  

If you have any questions about investing in condos, single family homes or multi-family properties give me call.  I would be happy to discuss the various options and potential returns one might achieve in our current market.

Boulder County Real Estate vs the DJIA

After the recent months of upward activity in the stock market and subsequent past few weeks of big drops I wanted to take a look at the market vs Boulder real estate over the past several years.  Here is what I found.

One thing to keep in mind with these real estate examples, we are talking return based on appreciation only.  When we talk ROI in real estate investing we also have to add in the cash flows and equity build up from tenants paying down the mortgage. 

Past 60 Months
Median Single Family Home Price Boulder      +31.60%
Median Single Family Home Price Louisville    +23.30%
Median Single Family Home Price Lafayette    +14.55%

Dow Jones Industrial Averages                         +27.82%

Past 10 Years
Median Single Family Home Price Boulder      +35.25%
Median Single Family Home Price Louisville    +30.72%
Median Single Family Home Price Lafayette    +29.09%

DJIA                                                                   +39.64%

Recession Years Oct. 2007 - March 2009
Median Single Family Home Price Boulder       -25.29%
Median Single Family Home Price Louisville     +1.45%
Median Single Family Home Price Lafayette     -27.44%

DJIA                                                                    -52.98%  

Compiled from CNN Money and IRES MLS - Information deemed reliable but not guaranteed.

© Kevin Schill 2018