Boulder Real Estate Rental Rules Are Strict

The Boulder real estate market has always been heavy with rental homes, due in large part to the demand from students and staff at the University of Colorado. I’ve watched over the years as the rules for landlords have changed, mostly in an effort to protect tenants, and tenant’s rights and safety.

One of the things that the city of Boulder does, which you might not find in other communities, is it requires rental licenses, and third-party inspections on all rental properties. Now a new wrinkle is potentially costing owners of rental property thousands of dollars.

Those feeling the pinch on this issue are mostly landlords that are transferring ownership into an LLC (limited liability company). If you’re not clear on why a property owner would do this, it would be a good idea to talk to your CPA or another business planning professional.

The rub here is that the city has a rule: whenever ownership of a property transfers, a new rental license, and a new third-party property inspection is required. This all makes some sense if there really is a change of ownership, and a new landlord is taking over possession and management of a rental property. In this LLC switch scenario, there’s no financial transaction, no management change, but there’s still the cost that many property owners feel is a form of double dipping on the part of the city of Boulder.

While the license isn’t carrying a hefty price tag at $46.00, the inspections can run around $200 for a single family home, and upwards of tens of thousands of dollars for a very large apartment complex with two or three hundred apartment units.

If you had been getting the kind of advice I have, you’d know that many of these property owners probably should have started out with some sort of business entity from the beginning. Tax rules do change over time, and so you have to be flexible with your business strategy and adapt to the moving target of new rules and laws.

Some would say it’s just a matter of considering these fees a simple business expense and get on with it. I think if you were faced with a $20,000 cost, just because you were being a smart business person who was listening to his tax or legal professional, you’d be a little peeved also.

Fortunately, the Boulder city council is ever flexible and receptive to working through such matters. It’s been three years though, since the matter has first come up in controversy. There were some assurances that the city was to make adjustments or at lease consider this issue. As far as I can tell from information online about the code, the rule stands as it has been so far.

Thank you for reading my post. If you are thinking about real estate investing, please contact me so I can help you with your plans. Purchasing investment property is an area I’ve been busy in with several real estate investors. I’d like the opportunity to help you also.

-Zachary Epps

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