Rental Income Economics of HCOL + Low Income Markets?

Can some of you investor types help me understand the economics of rental investing in hot markets like colorado mountain towns (Not tier 1 places like Vail, more like Salida, Durango, etc)? I see so many of these run-down, unrenovated ~1950/60s long-term rentals getting dumped on the market and still selling for $500+/sqft. Something like a 3/bed 1/bath selling for 700k, but the average local income is….maybe $50k.

How are investors making money in these markets when they:

Need to renovate because the places are in some cases literally about to fall over Local rents don’t support more than ~4k/mo for this type of property Short Term rentals are Illegal (nothing less than 30 days). And yes, it’s strictly enforced.

Even an all-cash buyer is making, maybe ~3-4% a year before taxes, insurance, maintenance, etc. Rent on a leveraged purchase doesn’t even appear to cover the mortgage.

Why not invest in a market with higher incomes / better returns? Is my math way off?

submitted by /u/theb0tman
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Can some of you investor types help me understand the economics of rental investing in hot markets like colorado mountain towns (Not tier 1 places like Vail, more like Salida, Durango, etc)? I see so many of these run-down, unrenovated ~1950/60s long-term rentals getting dumped on the market and still selling for $500+/sqft. Something like a 3/bed 1/bath selling for 700k, but the average local income is….maybe $50k. How are investors making money in these markets when they: Need to renovate because the places are in some cases literally about to fall over Local rents don’t support more than ~4k/mo for this type of property Short Term rentals are Illegal (nothing less than 30 days). And yes, it’s strictly enforced. Even an all-cash buyer is making, maybe ~3-4% a year before taxes, insurance, maintenance, etc. Rent on a leveraged purchase doesn’t even appear to cover the mortgage. Why not invest in a market with higher incomes / better returns? Is my math way off? submitted by /u/theb0tman [link] [comments]

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