First Time Investor In Crazy Denver Market Looking For Advice And Perspective - Please Help!!

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First Time Investor In Crazy Denver Market Looking For Advice And Perspective - Please Help!!

Erika C.
Investor · Denver, CO · Member since 2015 · 18 posts · 2 votes

Dear Bigger Pockets Community,

I am a first time home buyer that has almost officially survived the crazy Denver housing market. I have been looking to buy my first home for over a year, and have been beat out on houses at least a dozen times due to all cash buyers, a low appraisal and people who were simply bidding more then me.

I am finally under contract on a big old house that has been converted into a triplex. If all goes according to plan...I will only be paying $550 for my mortgage and that includes utilities for the entire unit and cable. I am very exciting about this house hacking opportunity but I just want to make sure it is indeed a good deal and I know what I'm getting myself into.

The Drama: I currently live with my boyfriend in Jefferson Park. He bought his house in  September 2013 for $315 and six months after we lived there an investor bought it for $480. The house we live in is a cute renovated victorian that is close to everything. The house was built in 1885, beautiful, in great shape and frankly I am very sad they are going to tear it down and build fugly overpriced apartment buildings. Since, he bought it, I didn't have a lot of say in what was going to happen to it. While I agree it is a great economic opportunity for him - it would mean we were going to have to find another place to live in the crazy Denver market and a historic house in Denver is going to be torn down forever. 

After my bf officially was under contract to sell his house (the deal is he is going to close in August 2015 - I started looking for properties that we could rent out and move into when the time came for us to move out.

Last summer, I started looking to buy a house in Denver with a $250,000 budget. There is almost nothing available at that price point in the city and by fall I had almost given up. This summer, I have a new job and am fortunately approved for up to $375 for a conventional loan and $425 HOA loan.

After looking for over a year I am finally under contract on a a triplex in north east park hill at the intersection of MLK & Leydon. 

My bf had opted to go golfing the day I was going to go look at the house so the first time he saw the property was during the inspection. At this time expressed he was not excited about the property and thought I should back out of the deal. He has pointed out every potential negative thing about this house and neighborhood and I'm not quite sure if he is being reasonable or not. Can someone please guide me on weather or not his concerns are rational? Or if he is acting spoiled about potentially moving 10 minutes away from down town Denver into a "less hip, less up and coming" neighborhood. 

Details on the property: The house was built in 1954 and used to be "the mansion on the block" at some point the split up the house into 3 units. The front unit has been renovated and currently rents for $875, the back unit currently houses a section 8 tenet and is in rough shape, but rents for $750...the unit we would live in we would only pay $550 each for the mortgage. 

My concerns:

Is the cash flow potential there? I won the bid on the house with an escalation clause at $390K - My monthly payment will be 2,295.12 + 250 for utilities. With no renovations whatsoever we will only be paying $550 for the mortgagee which is $450 less than what I currently pay my bf for his mortgage. If I renovate the middle unit and back units of the triplex...do you think I can get around $1400 for the 2 bed 2 bath and $1000 for the 1 bed and 1 & 1/2 bath units in Denver? The property is located less than 10 minutes from the heart of down town.  If the units rent out for the prices above I will be getting a monthly cash flow of $730 after I move out...Is it reasonable to think I can make cash flow off of this property? My boyfriend doesn't think so.....he said people don't want to move to this neighborhood.

My boyfriend has also said that he thinks people are not investing in north east park hill because he doesn't see any new construction or flipping going on. Is this accurate of him to think that? Are investors investing in north east park hill?

The property has outdated shingles and will need an entire new roof it the current roof is damaged. If this is the biggest thing wrong the the property, is that a deal breaker? Or should I just budget for a new roof in the future accordingly?

Is north east park hill a good area to house hack and buy my first property?

There has been gang activity in this neighborhood in the past, but the city has taken measures to improve this and things have gotten better....Is it safe to assume that it's only going to continue to get better?

Even if I have to put $20K into this property to make it a little nicer for future tenets, is this going to be worth it in the long run? 

Any input you have on this matter is greatly appreciated. When I found out I was under contract and was going to get the opportunity to house hack my first property (which I hope to be the first of many) I was ecstatic. But after hearing my boy friend literally list every possible thing wrong with this neighborhood and location I am feeling a bit defeated. Especially since I have been trying to buy a house in Denver for over a year. 

Please let me know your thoughts. 

Thanks,

Erika

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Bill S.Pro Member
Moderator
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
11y

@Erika C. save your $20K! I repeat, save your $20K. Live with the property for 1 year then decide how to spend your renovation money. That is except for bringing the current vacant unit to rentable condition. You will be surprised about how fast it will go.

Great that the unit is on individual meters for electric. The only challenge can be if they didn't take the time and $ to make sure the circuits only control power to the unit they server. You electrician should check that out. It's not uncommon for there to be a few stray outlets that get their power from one of the other units.

Individual controls on heat is good as well. If you don't want to go the route of billing by square footage, then there are meters/timers that can be added to the thermostat lines that can record the usage by each unit. You can then prorate by usage. You will want this setup if you get a tenant that abuses the shared component. Most are respectful so probably best to keep that in your pocket and only do it if necessary. Make sure your lease allows you to change to that type of billing at your discretion.

I used to sort of live in the area, about 20 blocks South, and I'm not a huge fan of it. Perhaps it will be different in a few years. While it is 10 minutes to downtown, there is a lot of RE that is physically closer. IMO those areas will need to mature before your area becomes the next "place to live" if it ever does.

Rents. I think your rent estimates are way high. Look on Craig's List for actual units in the neighborhood that are advertised. Look at how long they stay up and what they rent for. Drive the area and call the for rent signs. You RentJungle is way out of line. According to the Apartment Owners Association of Metro Denver rents are increasing at 10%. That really depends on the price point and the location. You really need to drill down on your rent projections. You should have at least 3 examples of very similar type properties for each unit. It will be hard but the most important aspect is location. They absolutely must be on your side of MLK and must be in the same neighborhood. If you can't find any on Craig's List that is a huge clue. You won't find you tenants on Craig's List. Next drive the neighborhood and call every for rent sign you see. I think we have maybe two more years of rent growth at the bottom end (what your units are). After that we will have significant pressure to hold rents steady. 

What about laundry facilities? What does each unit have? No laundry means lower rents and more turn over.  

Point of correcting for your population growth. It's 20K growth per YEAR not month. It's still pretty good.

Finally, if salaries start to climb we could see rents continue to increase. That said, you should plan on zero growth with good reserves. If it grows then you have some extra money. Don't bet or count on growth of either rent or price of property. Most times both happen but don't count on it. A good test is to see how you would feel if the property value and rents didn't increase for the next 10 years. If you are good with that then, go ahead.

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  • Mark Nolan
    Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
    11y

    @Erika Croonenberghs

    Welcome to Bigger Pockets. BP is a treasure chest full of resources. You will find resources here from blogs to pod casts and forums. You can also send messages to members which is my favorite part of the website.

    1Reply
  • Jean BolgerPro Member
    Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
    11y

    So, let me get this straight... BF sells his house and pockets 150k or so, and then pouts because the house you are buying for him to live in isn't hip enough?

    NE Park Hill is fine! It's close to Stapleton, easy access to downtown and 1-70.. a few blocks south and you are in fancyhouse/bigmoney North Park Hill... 

    In general, by the time non-investors like your BF think a neighborhood is a "good one to buy into", the major opportunity is already gone.

    I can't really speak to the particulars of your deal and the projected rents. They seem  high to me, but I'm not actively renting anything in Denver right now and I am continually surprised by the prices I hear.

    I think you're being smart, and I think the boyfriend is being sulky.

    I'd probably buy the triplex and dump the chump...

    This didn't answer all of your questions, but then you do have an awful lot of questions packed into that post!

    1Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    11y

    @Erika C. without exactly knowing where the house is, it's tough to make a call on the neighborhood. 

    Real Estate is about 3 things, Location, location, and location.

    I will tell you this, it doesn't matter how up and coming an area is, tenants will not rent there unit it has "turned". Until it "turns" you are stuck with the current riff-raff walking the streets or renting below market rents. I know. I bought in Jefferson Park 10 years ago. Your bf would have said the same thing about that area then. To get good tenants I had to rent below market because no one wanted to live in that area. The day I took possession, I was had 3 of 4 units vacant and all 4 were trashed. 

    Without knowing the area where you are buying it's hard to say what rents "would be if..."

    Do you have the funds to fix the roof and fix up the units? 

    One thing to keep in mind is that some insurance companies do drive by inspections after you buy a property and they may tell you that you have to fix the roof or they will drop coverage. Can you absorb that expense the first month after close?

    What you have described is absolutely the worst type of property to own from a management perspective. Listen to the podcast about Waldo where Brandon Turner and Ben Leybovich discuss the 3 unit property that Brandon purchased. Ben has some very good points about the nature of the property which sounds very similar to what you have under contract.

    Now having said all that, you have to make the call and live with it. With sweat and hard work you can make most anything work. It won't be easy and given what you are doing it will be harder than many other options. Keep in mind it's not often you can make $150K in 2 years in any real estate deal like your BF did.

    One plus I see is that the intersection you name is fairly close to a new light rail line. History has been very kind to property near light rail for a year or so after the line opens. You should see a nice bump in value after it opens barring disasters on other fronts like interest rates, oil and world peace. This would allow you to refi out of PMI which would increase cash flow.

    In the end, you have to take a good hard look at yourself and see if you have the grit to make it work no matter what, even if your BF leaves because you are no longer in a cool neighborhood.

    0Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    11y

    I don't know much about specific locations in Denver. It is the nations top spot for millennials and that trend just got started. Good luck!

    @Erika C.undefined

    1Reply
  • Matthew Schroeder
    Investor · Carmel, IN · Member since 2014 · 332 posts · 245 votes
    11y

    It's 3220 Leyden Street, right?  http://www.zillow.com/homedetails/3220-Leyden-St-D...

    The neighborhood is generally ok.  The property says that it is on a boiler system, so you might want to check if the owner is responsible for utilities.

    0Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    11y

    Welcome to BP & the mess that Denver RE is right now.

    First of all, what does your Realtor say?

    A friend of mine has done 2 flips in Park Hill. There was a LOT of interest in the homes and area. I think it goes street by street at this point. What do the other homes on the block look like?

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    11y

    @Erika C. you might want to check for zoning issues with that property. Current zoning calls for single family unit on 6,000 sqft lot. You have a triplex. It's definitely non-conforming. You just have to find out whether or not it's legal. If it's not legal then the sale should at a minimum be subject to it being made legal. It's a costly and lengthy process to prove and get grandfathered in if it's not currently legal. Also not all are successful at getting grandfathered in.

    0Reply
  • Erika C.
    OP
    Investor · Denver, CO · Member since 2015 · 18 posts · 2 votes
    11y

    @Bill S the lot is 6,870 sqft...I checked the Denver property records for this house and under property type it says "residential triplex" and under zoning district it says "E-SU-DX"

    Where can I go to confirm that this property has been zoned and approved to be a multi-family property?

    The location of this property is 3220 Leydon St...basically one house away from the intersection of MLK & Leydon st. It's less than 10 minutes drive to downtown...Do you foresee this being a good location in the future? I work in RiNO so living there is super convenient for me. 

    Thank you so so much for all of your info and feedback, I'm going to listen to the podcast you recommended this afternoon.

    0Reply
  • Erika C.
    OP
    Investor · Denver, CO · Member since 2015 · 18 posts · 2 votes
    11y
     @MattM

    My realtor thinks it's a good deal. She says I will have to budget for a new roof in the future though. My appraisal is on Tuesday, so as long as the house appraises at or more then when I won the bid at the deal will go through.

    The other houses on the block look fairly nice. I noticed there was a young couple walking their dogs around the block then walked into a house across the street that looked like it has been redone. 

    After for looking for over a year and at hundreds of properties and loosing so many houses when I am literally approved up to $375K for a loan I am just DONE with the Denver real estate market. Being a first time buyer here has been a nightmare. 

    What do you think? Is this market going to get any easier for a first time home buyer?

    0Reply
  • Erika C.
    OP
    Investor · Denver, CO · Member since 2015 · 18 posts · 2 votes
    11y

    @matthewschroeder yes that is the house I am currently under contract on. 

    The boiler heats all 3 units and was reconditioned in 2014..the current seller/owner says that the monthly heat and water bills average out to about $250 a month over the course of the year. 

    Is anyone aware of any potential problems with a boiler heating all 3 units in a triplex?

    0Reply
  • Matthew Schroeder
    Investor · Carmel, IN · Member since 2014 · 332 posts · 245 votes
    11y

    How about electric - is it separately metered (3 meters)?  If electric is not being separately metered, then I presume you (as the owner) are paying the electric bill, so in effect, the rents which are being quoted in the listing/advertisement are a bit misleading (although technically accurate) as the rents include utilities.

    If the boiler is, on average, $250/month, then you are effectively paying about $85/month ($250 / 3 units) worth of heating expense for the tenant.  That should be "netted out" to get a better sense of the real (net) rent.  If you are also doing the same with electricity, you must also consider that in your calculations.  

    Usually, tenants will pay their own utilities - if those utilities are included in their monthly rent, then you must adjust your calculations/numbers accordingly.

    0Reply
  • Erika C.
    OP
    Investor · Denver, CO · Member since 2015 · 18 posts · 2 votes
    11y

    Does anyone know any good contractors in the Denver area that can help me get this outdated wood paneling off of these walls? Anyone know what the average cost of this project is off of the top of your head? 

    Thanks for all of your help everyone! By the way, the bf is starting to warm up to the idea of living in Park Hill.

    Cheers,

    Erika 

    0Reply
  • Jean BolgerPro Member
    Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
    11y

    As far as the utilities, you can apply a proportional billing based on square footage. You would simply divide the total and bill the tenants proportionately. It's not ideal, but it does keep tenants from feeling like they can burn through as much as they like because it's free.

    I would consider doing an overlay of the walls with that  thin drywall (quarter inch, I think? not the heavier stuff that is used on its own for walls) and leaving the ceiling wood. It might be a lot cheaper than pulling all that out  and it would look very mid-century hip, IMO. 

    Glad to hear the bf is getting on board - and my apologies if I was rough on him in my last post. I'm usually more politic than that!

    Please let us know what you find out about the "X" in E-SU-DX. I took a quick look at the zoning website but didn't see how to find out more about that. I am guessing this might be a variance that allows the 3 units?

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    11y

    @Erika C. that at a minimum you should back bill tenants for use based on square footage. $250 per month on an average is very high. I have a four unit that has no insulation to speak of that averages about $200 per month for gas only.

    It's a rental, paint the paneling until you upgrade the units to higher end tenants and you will need to do the unit. Rough estimate would be $65 per 4x8 sheet of drywall. This is from a previous post on the same topic here on BP. That would not include the tear out. It's not going to be cheap. Save the work for when you are felling flush.

    0Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Erika C.:

    What do you think? Is this market going to get any easier for a first time home buyer?

     The are predicting 3-4 more years of this since our supply is such an issue. Also us millennials are starting down the path towards home ownership. My friend just told me about a 2bd/2ba condo at I-25 and Hampden renting for $2200 a month....Crazy. That is almost $1k more than my mortgage on a 3500 sqft updated home.

    Love the wood paneling....WOW! That will be a bit of work. 

    0Reply
  • Bill Hamilton
    Denver, CO · Member since 2015 · 251 posts · 123 votes
    11y

    Others have talked about the utilities. Keep those costs in mind and verify with Xcel energy. It will affect your bottom line. Based on the (admittedly crappy) Zillow comps map, it would seem that you are potentially buying the white elephant in the neighborhood. Never buy the most expensive house in the area. Buy the way cheaper house and upgrade to make it fit the market. And yet while saying that...... this is a very old house and looks like (at least from a pulling permits POV) the upgrades and renovations are far in the past. If you intend to do upgrades, the second you open a wall or ceiling, that area is no longer grandfathered and must be brought to code. Upgrading the house, just from the standpoint of electrical outlets etc can run many, many thousands or 10's of thousands to complete. Bring in a good contractor and get firm estimates prior to closing this transaction.

    Also keep in mind that while the realtor may be competent and honest in her evaluation of this being a good deal, she stands to make a $12,000 commission upon the deal closing so she is not a disinterested 3rd party. She definitely has a financial motive to want you to purchase this property.

    Your desired rental price after renovation seems high....simply based on the percentage increase from where it currently stands. Look at Craigslist etc and see where similar rooms are renting in the area. That may be totally reasonable with updates but generally, the neighborhood and amount of square footage is going to be a huge factor in what you can get for it.

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  • Bob H.
    Rental Property Investor · Cedar Park, TX · Member since 2014 · 415 posts · 272 votes
    11y

    I took down some paneling like that years ago. I gave some to our painter and gave away more to somebody on craigslist. Try posting on craigslist to see if you can get someone who wants the paneling and is willing to remove it free. You'll still need to fill nail holes and texture the ceiling and walls, but it would be a start.

    0Reply
  • Erika C.
    OP
    Investor · Denver, CO · Member since 2015 · 18 posts · 2 votes
    11y

    @Bill Hamilton  The previous owners updated the electrical systems in 2014. The unit has 3 separate electric meters. Each unit has a system for the tenets to control the heating.

    Good call on calling and confirming with Excel on energy costs. I am going over to the house this Tuesday to have my good friend who owns and rents outs 3 houses in Denver take a look at everything and get his thoughts on the property.

    Maybe it would be wise to also have a general contractor and master electrician come with me at that time. Any recommendations for master electricians in the Denver area that specializes in old homes? Also, an recommendations for general contractors?

    As far as buying the white elephant on the block...yes it is the biggest house on this block BUT if you cross over and go to the other side of MLK you will find homes very comparable in size. 

    My thoughts on the rents....Denver is on pace to have the largest rent increases in the country for 2015.

    http://kdvr.com/2015/04/14/study-denver-apartment-...

    I have heard that at least 20,000 people move to Colorado each month.

    Here is an updated map of what the average rents are for each area.

    This is what each unit in the Triplex is currently renting for.

    Basement unit : this unit is the most updated unit of the 3. It is a little less than 1,000 sq ft and has 1 bed and 1 bath. The bedroom is bigger than your average bedroom and the closet is genriously sized compared to other old homes I have lived in in Denver. The unit is pretty nice and the current tenets are high quality tenets (an older couple) that don't strike me as the type of people that are going to trash the unit.

    The Middle Unit : This is the unit where my bf & I would live. It is probably around 1200 sq ft and has 2 big bed rooms and 2 bathrooms. This is the unit with the old wood paneling. I imagine with some updating this unit could rent for at least $1400 - with the way current rent trends are going.

    The back Unit: This unit is in super rough shape and is in need of a good clean and some updating. The structure is sound though. It has 1 bed and 1 & 1/2 baths. This unit rents for $750. I'm thinking (hoping) that after this unit is updated it will rent for $875-1,000. 

    The property is less than a 10 minute drive to downtown, 5 minutes away from the Stapelton community and close to all the great things that Denver has to offer.

    Is this a decent location?

    Does anyone think it is outrageous for me to think these numbers are unreasonable after I update and make the unit nicer? I have about $20K set aside for rehab costs. Also, when we live there I will only be paying $550 towards my mortgage and that includes cable + $250 for utilities.

    According to RentJungle.com the rents in Denver have increased by 21% in the last 6th months!

    https://www.rentjungle.com/average-rent-in-denver-...

    Am I crazy to think that the rents are going to continue to go up with the mass amount of people moving here and the lack of available housing units available?

    Really enjoying the BP community so far...thanks for all the insight everyone! I would be so lost otherwise :)

    0Reply
  • Bill Hamilton
    Denver, CO · Member since 2015 · 251 posts · 123 votes
    11y

    Erika Croonenberghs I would guess that rents will continue to rise. For a while. The level of growth in rent prices is unsustainable in the long run. Salaries are not rising at anywhere near that level so at some point it will stop. I would also guess that at some point you will see a California style property/rental market crash. The hard part is to predict how far away that is and how severe it will be. I think the Denver market has become very similar to the S. California markets. People really seem to want to live here and make immense sacrifices to do so. Although much of this may be due to the recent change in our marijuana laws. As some other states make the same transition (which I think is inevitable) this may diminish as a motivating factor. But any time you see this type of rise in prices in such a short time, there is always a drop later. That doesn't mean that buying is a bad thing. But I would try and make sure you have enough reserves to survive a multi year bad stretch where rents plummet. That may not happen and the market may instead find equilibrium and just stabilize. But I would not be willing to bet on that. Use at least some of the cash flow to build a reserve fund. Both for the possibility of a downturn and against repairs and the occasional unrented room.

    0Reply
  • John D.
    Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes
    11y

    This looks like a reasonable purchase @Erika C..  

    I would encourage you to use a rental calculator, and fill in the numbers pretending that all of the units would be rented.  There are many good ones here on BP, here is one example.  If you share the output with the folks here, that will help guide the discussion.  This will help force you to write down all of the costs (including capex, maintenance, vacancy, taxes, etc) to help you think through some things you may be overlooking.

    http://www.biggerpockets.com/buy-and-hold-calculator

    With regards to the wood paneling you have a few options with the walls (I would leave the ceiling).  I wouldn't let this expense stop you, it won't be very expensive and you can always delay this expense until later.

    Cheap:  Paint it white.  If you hate how it looks, proceed to one of the below options


    Inexpensive:  Screw thin drywall to the existing walls, texture, paint.  $1-2 per SF perhaps.


    The right way:  Remove paneling and whatever might be behind it, drywall, texture, paint perhaps $2-3 per SF ballpark.

    1Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    11y

    I got to say this pad looks unique...at least comparing to modern standards. The paneling will be the least of your issues. Good luck!

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    11y

    @Erika C. save your $20K! I repeat, save your $20K. Live with the property for 1 year then decide how to spend your renovation money. That is except for bringing the current vacant unit to rentable condition. You will be surprised about how fast it will go.

    Great that the unit is on individual meters for electric. The only challenge can be if they didn't take the time and $ to make sure the circuits only control power to the unit they server. You electrician should check that out. It's not uncommon for there to be a few stray outlets that get their power from one of the other units.

    Individual controls on heat is good as well. If you don't want to go the route of billing by square footage, then there are meters/timers that can be added to the thermostat lines that can record the usage by each unit. You can then prorate by usage. You will want this setup if you get a tenant that abuses the shared component. Most are respectful so probably best to keep that in your pocket and only do it if necessary. Make sure your lease allows you to change to that type of billing at your discretion.

    I used to sort of live in the area, about 20 blocks South, and I'm not a huge fan of it. Perhaps it will be different in a few years. While it is 10 minutes to downtown, there is a lot of RE that is physically closer. IMO those areas will need to mature before your area becomes the next "place to live" if it ever does.

    Rents. I think your rent estimates are way high. Look on Craig's List for actual units in the neighborhood that are advertised. Look at how long they stay up and what they rent for. Drive the area and call the for rent signs. You RentJungle is way out of line. According to the Apartment Owners Association of Metro Denver rents are increasing at 10%. That really depends on the price point and the location. You really need to drill down on your rent projections. You should have at least 3 examples of very similar type properties for each unit. It will be hard but the most important aspect is location. They absolutely must be on your side of MLK and must be in the same neighborhood. If you can't find any on Craig's List that is a huge clue. You won't find you tenants on Craig's List. Next drive the neighborhood and call every for rent sign you see. I think we have maybe two more years of rent growth at the bottom end (what your units are). After that we will have significant pressure to hold rents steady. 

    What about laundry facilities? What does each unit have? No laundry means lower rents and more turn over.  

    Point of correcting for your population growth. It's 20K growth per YEAR not month. It's still pretty good.

    Finally, if salaries start to climb we could see rents continue to increase. That said, you should plan on zero growth with good reserves. If it grows then you have some extra money. Don't bet or count on growth of either rent or price of property. Most times both happen but don't count on it. A good test is to see how you would feel if the property value and rents didn't increase for the next 10 years. If you are good with that then, go ahead.

    2Reply
  • Erika C.
    OP
    Investor · Denver, CO · Member since 2015 · 18 posts · 2 votes
    11y

    @Bill S.  The property does not have laundry facilities. Do you know of any creative, inexpensive ways to make them available to the entire unit?

    Thanks for your continued help and insight...really forcing me to do my due diligence on this property which is a great thing. 

    0Reply
  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    11y

    @Erika C. for me that is what I would focus my efforts on. My units without a washer and dryer turn over at more than twice the rate of those that have, in the unit washers and dryers. I have found that a closet near a kitchen or bath can be a good place to install a stacked unit. I have also placed them in the corner of a larger kitchen or found space for them in a bathroom. The next best option is to use some common space and install them there where they are shared. The down side is that someone has to pay the utilities on them and there are others using those utilities.

    Turn over is a huge expense. Perhaps the money is not so much if you get good tenants but it really sucks up your time. I figure it takes at least 20 hours per turn-over and I don't do any of the actual work.

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  • Jean BolgerPro Member
    Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
    11y

    I agree about the washer/dryers. Put them in if at all possible, tenants really want them. In fact, once you've lived somewhere with your own W/D it's hellish to go back to needing a laundromat. Those one piece stacked units can fit in pretty small spaces. They are usually called unitized washer dryers or "laundry centers".They're not cheap, at around $1200, but they'll help you rent the places and hold on to tenants for sure.  AJ Madison is a good source for appliances, with free shipping/no tax. 

    I would feel fine about that neighborhood. (there's currently a 1 bd for rent on Craigs for $1000- you might watch and see if it rents, or how long it takes to rent). The Stapleton influence in the area is under-rated at this point, IMO, because it's seen as sort of a "bedroom community". But there is a big swath of land over by I-70 that is on the books to be developed as business/tech parks, and the potential employment numbers are  very high. Sure, some of those people will be living in Stapleton proper, but not everyone will want to pay those prices.

    I moved from the west side (Highlands) to just east of Stapleton a few years ago. A friend of mine made a similar move not long after. We always say (facetiously) that "the east side is the new west side"! I don't expect the area to boom like Highlands anytime soon, but if the old adage about following the gays and the artists to the "next place" is true, then the east side may just eventually be a "next place". At any rate, I'm happy here, and my cost of living is way down. But, as others here have said- make sure the number work for you as they are presently- don't rely on too big of a jump in income. If you get it, that's a great bonus. But you don't want to feel pinched if it doesn't happen.

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