A Great Place To Peak!
Investing in Colorado Springs, Colorado
Would you want to invest in an area that had beautiful views, home to several large universities, moderate home prices, and is home to one of the largest defense industry areas outside of the east coast? Oh yeah, this place was voted as the #1 place to live by CNN Money in 2006. I would be talking about Colorado Springs, Colorado.
I was fortunate enough to spend a week in Colorado Springs with father and son investors, Tom and Kory Kempton. Tom has spent close to 40 years in building construction and his son, Kory, had spent the last few years as a surveyor. Between them they had a few rentals but were relatively green and inexperienced in getting their full-time real estate investing off and running. They actually lived about two hours north in Eagle, CO, which lies between Aspen and Breckenridge, a much higher dollar and vacation home area. We chose to focus in Colorado Springs due to several items: relatively affordable home market when compared with other areas of the state, large amount of military jobs (Fort Carson Army Base, Air Force Academy, Peterson Air Force Base, and NORAD), and home to several colleges (Pikes Peaks Community College, University of Colorado at Colorado Springs, Air Force Academy, and other community colleges). One of the positive trends for investors in Colorado Springs is the fact that the military has chosen to transfer a lot of military personnel from other military bases across the country to become one of the largest army bases in the country.
When ever I arrive into a new area with an investor, especially if the investor is living in a different area than they are investing, it is so crucial to have an awesome team to support the investor. It is critical to have one to two realtors that have the investor mindset, a mortgage broker who can help get your end users financed (one that is licensed in FHA and VA loans is very important in this day and age), a knowledgeable and experienced title company (experienced in short sales, foreclosures, simultaneous or double closings, and willing to provide referrals), and several hard and private money lenders. It is also very important to set up and automate a marketing campaign that attracts deals, buyers, sellers, and other investors to network with.
One of the keys that I focus on when working with realtors is to ask the realtor how many short sales and foreclosures that they have helped buy or negotiate. Many realtors are used to doing the typical type of business, working with normal home buyers and sellers instead of working with investors. Most of these agents aren’t able to fathom the fact that people can actually buy real estate at 60-70% of current market values. The biggest key to identifying a quality realtor is the response that they give you when you mention the fact that you are looking at paying wholesale prices for real estate. If the realtor is one that works with investors, they already understand this fact. If they don’t, they will often become uncomfortable, shifty, and will often glaze over. The bad realtors will often start to come up with reasons why this plan doesn’t work. Good ones understand that it is a numbers game and the more deals submitted, the more likely that more deals will close, leading to more commissions. You have to realize that as an investor, the realtor works for you and not the other way around. If a realtor baulks at submitting multiple, low ball offers, fire them and get another one. It is not difficult for them to set up automated searches on the various MLS systems in the format that you request to have short sales, REO’s, motivated sellers, and or expired listings to be emailed to you on a regular basis.
The idea is that if they do a little work on the front end, then it will save them a lot of work on the back end.
We were very fortunate to find two realtors, Larry Becht and Shane Bruckner with Park Ave Properties. Bother Larry and Shane were active investors as well along with working many short sales, REO listings, and having access to hard money lenders, a knowledgeable and experienced title company, and having a broad list of investor buyers. Along with having these resources, they also had an in-house mortgage company (Kevin and Hans) that were also active investors and hard money lenders. We felt like we hit a homerun with Shane and Larry as they immediately pulled a list of short sales and REO’s that were listed on the MLS along with pulling the list in a way where we could easily manipulate the data (which was a huge plus as one we previously met with wouldn’t take the time to do). This extra little step allowed us to have a list of over 60 offers on short sales before the day was done, which allowed Shane to do a mail merge out to the listing agents to gauge interest. We were able to also narrow the REO list down almost instantly to a list that we could go out and inspect the following day.
After working with the realtors, we focused on marketing to the Notice of Default lists along with Craigslist, expired listings, and contacting banks and hard money lenders for defaulted loans and REO properties. We utilized Craigslist to build a list of buyers and wholesalers for Kory and Tom besides what Larry and Shane had along with building a short list of investors that they could talk to and network with. We also utilized www.CREonline.com and wwwREIClub.com to find hard money lenders and real estate clubs for Tom and Kory to network with and market their deals to.
We were excited to hear back from Shane that there was over 15 realtor who responded to his mail blast requesting contracts at 65% or less of fair market values on the short sales offers and that one offer at $50K on a $55K listing was approved (on a house that was valued at over $100K!). This would quickly give the Kempton’s a quick profit of $2-$5K in a wholesale fee or over $35K if they chose to do the rehab and sale themselves.
Another critical thing that makes Colorado Springs popular is the multitude of exit strategies. We focused on homes less than $250K to allow them the ability to either wholesale quickly, owner finance the homes, lease option, rent, or sell with conventional financing. I state conventional financing the last because it should be the last way to expect to sell a property (although it’s the most profitable) with the market being like it is. Taking the time to learn the flexibility of the different exit strategies allows for the Kempton’s to move property a lot quicker than your typical, non flexible investors.
All-in-all, Colorado Springs is an excellent market for investors to be investing in. Not only is it an excellent foreclosure and short sale market, but with the military being in town, it makes for a great rental and sales market. For those investors taking the time to take advantage of such a great market it will yield a mountain of profit and riches, making the local Pike’s Peak envious!