Every quarter, the Apartment Association of Metro Denver publishes its Vacancy and Rent report. Combining vacancy rates and rent prices gives us a picture of the strength of the rental market. Vacancy rates tell us how many rental units are available, and rent prices go up and down depending on that number. Looking at the recently released report for quarter two, we can see that the low vacancy rates and rising rent prices indicate that now is a good time for prospective long term landlords to buy. We looked at the numbers for both Denver and Colorado Springs to give our investors a fuller picture of the Front Range.
- Listen to the podcast “#304 DDD: Deep-ER Dive – How to Calculate Profits for Your Rental Property” on the Denver Real Estate Investing Podcast” or #44 on the Colorado Springs Real Estate Investing Podcast.
- Watch the YouTube video (at the bottom).
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
This graph shows vacancy rates quarter over quarter. We usually see it drop due to seasonality this time of year, but not generally at this rate. Going from 5.5% to 3.5% is a nearly 2% drop. If you look at previous reports, the vacancy rate is generally between the high 4% to 5% range. In the Springs, we saw a similar trend: vacancy rates dropped from 5% to 4.4%.
Because there are fewer vacant rental units, rent prices are starting to increase. Vacancy and rent go hand in hand as they’re a product of supply and demand. The fewer rental units available, the higher rent prices will be. Last quarter, median rents were $1540, but now they are $1650, over $100 higher. The Springs also saw a big jump, from $1333 to $1430.
This shows that for landlords, it’s still a good time to buy. We saw housing prices go through the roof last year, and now we’re seeing the rents rise to match them. More people are choosing to rent rather than buy because of the rising housing prices, so now is a good time to purchase a rental property if you’re able. This is another data point that supports what we’re trying to do—build wealth through real estate.
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