Keep the Colorado House, Rent It, Buy the Next One
Program and regulatory figures verified September 19, 2026. Details change; confirm your scenario with us.
In the mountain markets this is often the sensible structure, because a 93 day time to pending is a season rather than a gap. Just understand what you are signing up for on the way out.
Why this structure comes up more in Colorado
Because of the spread between regions. A Denver owner facing a 48 day mean time to pending rarely needs to become a landlord. A Steamboat Springs owner facing 93 days, or a Glenwood Springs owner facing 86, is looking at a materially longer carry, and renting converts a timing problem into an income question.
It is also the structure that preserves optionality in a market where mountain values rose over the year while Front Range values eased. Holding an appreciating asset while you settle into the next house is a defensible plan, provided the numbers work and you understand the exit.
The Colorado rule that changes the exit
HB24-1098 was signed on April 19, 2024 and took effect the same day. It prohibits a landlord from evicting a residential tenant unless the landlord has cause, and it removes reliance on lease expiration by itself as a reason to end the tenancy. The relevant provisions sit at C.R.S. 38-12-1301 and following.
The permitted no-fault grounds are specific. The landlord intends to sell the premises, withdrawing it from the rental market. The landlord or a family member will occupy it. Demolition, conversion or substantial repairs are planned. The tenant refuses to sign a new lease with reasonable terms. There are fault-based grounds as well, including a history of nonpayment.
For our purposes the first one is the important one: selling is an enumerated cause, so renting the departing home does not trap you in it. What it does is add a notice period, generally 90 days written notice before lease expiration for the sell or occupy grounds. That is a planning input, not a barrier.
We are lenders and this is landlord-tenant law, so the specifics of your situation belong with a Colorado attorney. We raise it because it sets the timeline we underwrite against, and because a borrower who assumes they can list the house next spring on 30 days notice has the wrong timeline.
The federal rule that changed in September
Fannie Mae restructured rental income policy in Announcement SEL-2026-08, dated September 2, 2026. Lenders are encouraged to implement immediately but must do so for all loans with application dates on and after November 1, 2026. Departing residences are governed by B3-3.8-05. The content formerly at B3-3.1-08 has moved.
Three things matter for this plan.
First, lease agreements are not permitted for any departing residence. Market rent must be established from a complete appraisal including market rents, a Form 1007 comparable rent schedule for the occupied unit, or a market analysis tool supported by at least three comparable rentals. Detail on the Form 1007 page.
Second, the math. Gross market rent times 75%, with the remaining 25% absorbed by vacancy and maintenance, less that property's full PITIA. A positive result offsets the departing residence's own payment. It does not become income that helps you qualify for the new house. A negative result is added to your debt ratio.
Third, reserves. Six months of PITIA on the vacated property where the borrower has less than 12 months of property management experience, which describes most people converting their own home for the first time.
The two rules pull against each other
Worth naming plainly, because nobody else will. The federal rule makes the income easier to document, since you no longer need a signed tenant to establish rent. Colorado law makes the tenancy harder to end once a tenant is actually in place.
So the sequence matters. Establishing market rent for qualifying purposes does not require you to have rented the house yet. Actually placing a tenant starts a relationship that Colorado law governs on the way out. Those are separate decisions and they do not have to happen at the same time.
When it fits, and when it does not
It fits when the departing home covers its own payment at market rent, when you have the reserves, and when the overlap would otherwise be long. In Steamboat, Glenwood Springs, Edwards and Breckenridge that combination comes up regularly.
It does not fit when the plan depended on rental income increasing what you can borrow, which under the current rule it does not do. Compare the alternatives on the structures page.
Exemption eligibility, property tax classification and landlord notice requirements are legal and tax questions. Your CPA, a Colorado attorney, and your county assessor own those answers. We flag them because they change the numbers we underwrite.
Frequently asked questions
Can I evict a tenant in Colorado when I want to sell the house?
Selling is an enumerated no-fault cause under HB24-1098, which withdraws the premises from the rental market. The sell or occupy grounds generally require 90 days written notice before lease expiration. What changed in 2024 is that lease expiration by itself is no longer sufficient; the law now requires cause. Your specific situation belongs with a Colorado attorney.
Does Colorado let landlords end a lease just because it expired?
No. HB24-1098, effective April 19, 2024, prohibits evicting a residential tenant without cause and removes reliance on lease expiration alone. The permitted no-fault grounds include the landlord intending to sell, the landlord or a family member occupying the property, demolition or substantial renovation, and the tenant refusing a new lease on reasonable terms.
Can I use a lease to document rent on my departing Colorado home?
Not for applications dated on or after November 1, 2026. Fannie Mae B3-3.8-05 states that lease agreements are not permitted for any departing residence. Market rent must come from a complete appraisal including market rents, a Form 1007 comparable rent schedule, or a market analysis supported by at least three comparable rentals.
How much rental income counts from a departing residence?
Gross market rent times 75%, less that property's PITIA. If positive it offsets the departing residence's own payment and does not add to your qualifying income; if negative it is included in your debt ratio. Six months of PITIA reserves apply where the borrower has under 12 months of property management experience.
Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about financing, not a loan commitment and not legal, tax, or real estate advice. Property tax classifications, exemption eligibility, and landlord-tenant rules change and depend on your facts; your county assessor, your CPA or a Colorado attorney, and your real estate agent each handle their own part. Loans are subject to borrower and property qualification.