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Denver Real Estate Law Blog

Managing taxes on your rental home income

If you're new to real estate investing and you've recently purchased a rental property that you plan to generate income from, don't forget to pay your taxes on this income. The amount of taxes you pay will depend on how you use the home.

Perhaps, for example, you live in the residence most the year and rent it out for just a couple weeks each year. If it's 14 or fewer days of rental income, you probably won't have to pay taxes. If it's more than 14 days, on the other hand, you'll have to report it to the IRS.

Did you purchase a home or building with a construction defect?

Real estate purchasers in Colorado -- whether they are associated with a business or buying for personal uses -- must take care to ensure that the buildings or homes they buy are free of construction defects. This is especially the case with new construction, as that's when the most significant construction defects could still remain undetected.

Fortunately, even in cases where a purchase has already been finalized, if a significant construction defect is later discovered, the purchaser may have the ability to hold the construction company financially accountable. Here are three of the most common construction defects consumers could encounter after buying a new home or building:

Answer these questions before signing a commercial lease

Are you interested in renting commercial property? Are you concerned about finding a space that will suit your business needs, both now and in the future? Are you worried that you'll sign a lease that puts you in a bad spot?

There are many questions to answer before signing a commercial lease. If you just jump into the process by signing on the dotted line and hoping for the best, you may find yourself wondering what went wrong at some point in the future.

$115 million building sold in Denver

The $115 million Denver Tech Center was recently sold to the real estate firm Kingdom Oriented Real Estate (KORE). The 242,000 square feet Re/Max Plaza location was described by KORE as a "trophy asset."

According to the founding principal of KORE, who was very excited about the Denver commercial real estate transaction, "It is almost cost-inhibitive to construct a building of this quality with today's construction-cost dollars, let alone in a Denver gateway location like this on Belleview and I-25." The founding principal was very pleased and excited about the purchase, further adding that "This has Denver branding written all over it with these iconic names associated with Colorado."

It's currently a seller's market in Denver

The decision to buy or sell a home is never an easy one to make. After all, most Colorado residents will want to sell their homes at the highest value and buy their homes at the lowest value. Aside from finding an eager seller in a buyer's market, or an eager buyer in a seller's market, the price a home is sold at will largely depend on current market indicators. With this in mind, home prices in the Denver area have skyrocketed, making it feel like a seller's market in Denver.

According to a recent report from the Denver Metro Association of Realtors (DMAR), the average price of a home is just over $500,000 for the first time in the history of the region. According to a broker from The Peak Property Group, the biggest reason for the increase relates to a lack of inventory.

Are you investing in a short-term rental property in Aspen?

Buying into a short-term rental property can be lucrative for the average real estate investor. It's even better when the rental property is located in a highly desirable vacation destination like Aspen, where certain types of short-term and seasonal rentals are highly sought after for those looking for a beautiful escape -- during both the winter ski season and the warm summer months.

Here are a few things you might want to consider if you're buying a property that you will rent out short term:

  • Your property will get hit with some minor wear and tear. Short-term renters can be, on average, a little harder on a property than long-term renters. Be sure to work in the costs associated with minor maintenance and repair into the rental cost that you charge.
  • Decide what your goals are. Is this a property that you want to enjoy for several months out of the year and rent out the rest of the time to afford the cost? Or, is this a property that you intend for investment and income-generating purposes alone?
  • Core condominium buildings could be a great choice as many in Aspen have been designed with the short-term rental market in mind.
  • Homeowners' association fees will likely be associated with your property. Make sure you understand what they are and that you've projected the costs associated with maintaining the property accurately.
  • You might also want to consider looking at townhomes, fractional condominiums and single-family homes as investment options.
  • Single-family homes are usually outside the center of Aspen, but they're still attractive to some short-term renters due to their size and comfort. Homes are more popular during the summer months when accessing ski lifts is less important to vacationers.

Investing in retail space: Is it worth it anymore?

With the rise of e-commerce and rapid home delivery options, a lot of people are talking about the decline of the brick and mortar retail stores found in strip malls. However, this isn't always the case. There are certainly many cities with too much empty retail space, but others have a strip mall market that's thriving.

Even in situations when a name brand business moves out of a strip mall, there's a chance that another successful retailer will move in, or the space can be repurposed to appeal to an entirely different market.

Real estate shock: When your property has an undisclosed defect

When you buy a home, it's a long process. You want to make sure you get the house inspected and that you have a substantial contract that protects you in case defects appear after the sale. On the whole, it's the seller's responsibility to disclose any significant defects with the property.

If you look at a home and believe it's the right one for you, wait before you buy. Get the seller to disclose everything he or she knows about the property. Ask for paperwork for any changes made to the home, so you know what has, or has not, been fixed.

What questions should I ask about homeowners' association fees?

Homeowners' associations (HOAs) are great for making sure your neighborhood stays safe, clean and respectable. However, HOAs, with their fees and other requirements, can also represent a serious difficulty and challenge for certain neighborhood residents. As such, before you purchase a property in a neighborhood with an HOA, you'll want to understand everything you can regarding the HOA -- especially when it comes to the fees you'll be required to pay.

Here are a few questions to ask to make sure that you fully understand the HOA fees in your neighborhood:

  • What is the current HOA fee requirement?
  • How does the HOA decide to increase fees?
  • How often does the HOA implement fee increases, and what is the history of fee increases? Make sure to obtain a history of HOA fees going back the last decade.
  • How much reserve funds does the HOA possess?
  • Can you obtain a record of past special assessments?
  • What special assessments will be planned in the upcoming future?
  • What does the HOA spend the monthly dues on?
  • Are garbage pickup, cable and other benefits included in the HOA fees?
  • How do the HOA fees compare to other HOA fees in your area?
  • Do you have to pay extra for use of recreational facilities like pools and tennis courts?
  • Can you bring guests to the pool and tennis courts, and what are the guest restrictions?

Legal advice you need when buying a new construction home

Buying a new home is a wonderful luxury. Everything in the residence will be brand new, so you won't have to worry about maintenance and repairs for a long time. Also, depending on the contract, you can usually get the contractor to fix any unexpected problems that arise free of charge.

Just because a piece of new construction has never been lived in before, however, does not mean that you don't have to be careful from a legal perspective. Considering that a new piece of real estate will probably cost hundreds of thousands of dollars, it makes perfect sense to review the purchase contract with a fine-toothed comb.


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