House Hacking Denver

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House Hacking Denver

Taylor Burns
Denver CO · Member since 2018 · 50 posts · 22 votes

What's up BP! 

I am just getting started in the real estate game out in Denver Co. I am still just working on building up as much knowledge as I can. I want my first step to be getting into a house hack set up. I am looking for some advice on which sorts of deals I should be looking for to make this work.

I have been finding properties online and the MLS and running the numbers through the BP calculators. With the properties I am finding, most of them do not even allow me to break even, considering I will be taking up one room. Does anyone have any insight on what sort of deals I should be looking for before I buy? Should I be looking for off market deals or looking at auctions with the intention of doing a lot of fixing up?

I would like to get into a property this year but do not want to jump the gun on a house hack deal that turns out to not be a deal. I will be using an FSH loan and have limited starting capital at this time. Any insight helps! 

Thank you!! 

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Dan MackinBusiness Member
Real Estate Agent · Erie, CO · Member since 2014 · 1k+ posts · 512 votes
7y

@Taylor Burns there are plenty of properties out there in Denver that will make sense as a hack, but for most people who have just started learning they may be doing some calculations a bit too expensive. As far as loans go FHA is not your only route. There are things like HomeReady and HomePossible which may actually be better for your first property. If you want more options feel free to send me a message or come to the BadAss meetup tonight and we could chat there.

https://www.biggerpockets.com/forums/521/topics/627065-denver-meetup-october-22nd-badass-real-estate-investors

720-466-3378
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  • Missy Longshore
    San Francisco Bay Area California, USA · Member since 2018 · 14 posts · 3 votes
    7y

    Hi Taylor, 

    I'm curious what others have to say about this as well, but personally I think looking at house hacking as a cheaper way to live (meaning a way to significantly decrease your housing costs) vs. getting paid to live in a house (meaning your tenants/roommates completely cover your mortgage and then some) is the way to go. 

    In other words, rent out the master suite and take the small dark bedroom for yourself, find a duplex if you can and fix up the rental unit but not yours, etc. 

    Maybe it would help if you posted some of your numbers, too, and told us about your current situation and costs for comparison. Like how close are you getting to the 1% rule and how negative is your cash flow looking when you use the calculators? 

    If moving isn't an option, paying less than you otherwise would on rent sounds like a good way to go to me! 

    Good luck and FYI I bought my first place with an FHA loan and an additional 2013k loan for renovations and it worked for me!

    Missy

    1Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    7y

    I'd back up and define exactly what a "good deal" is for you. What kind of return are you looking for? Does equity matter to you? Cash flow? How much? If you haven't objectively defined these things, you'll be stuck in analysis paralysis forever. You'll be on BP filling out the calculators and posting, waiting for strangers to tell you if it's a deal, while someone else is putting the property under contract. 

    Secondly- deals can pop up everywhere. I hear people on BP saying that the MLS is a waste of time. Every property I have was purchased on MLS and I have great cash flow. The key is to know your market, know your buying criteria and be ready to make quick aggressive offers.

    Good luck!

    0Reply
  • Kevin Grinstead
    Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes
    7y

    Hi Taylor, there are some great options and pros and cons of house hacking. There are a few duplexes available in some of the less desirable areas for a reasonable price.  We have helped many clients realize their dreams. Whether you would like to rent out rooms, do Air bnb or get a duplex. I had one client rent one side of his duplex and then air bnb his room where he would stay in the living room to maximize rental potential.  

    Most properties will give you benefit especially if you consider that you will not have to pay rent and over the long term most properties will appreciate.  

    Even if you can set aside a few hundred dollars out of the rent you receive and the rent you would have paid in your apartment you will get ahead very vast.  

    Another way to add value is if you can put in some sweat equity. 

    0Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    7y

    Have you spoken to a lender about getting pre-qualified? Price will dictate where you can buy. I've got several clients that house hack now and am closing another here shortly. You should be looking at 4-5 bedroom homes. 

    Forget the auctions as you can't compete with the big boys. Do you have $cash$ for the fixup? Now is a great time since inventory is up and the market is slowing for the season. 

    0Reply
  • Dan MackinBusiness Member
    Real Estate Agent · Erie, CO · Member since 2014 · 1k+ posts · 512 votes
    7y

    @Taylor Burns there are plenty of properties out there in Denver that will make sense as a hack, but for most people who have just started learning they may be doing some calculations a bit too expensive. As far as loans go FHA is not your only route. There are things like HomeReady and HomePossible which may actually be better for your first property. If you want more options feel free to send me a message or come to the BadAss meetup tonight and we could chat there.

    https://www.biggerpockets.com/forums/521/topics/627065-denver-meetup-october-22nd-badass-real-estate-investors

    720-466-3378
    3Reply
  • Taylor Burns
    OP
    Denver CO · Member since 2018 · 50 posts · 22 votes
    7y

    Hey Everyone,

    Thank you very much for responding to this post! Sorry for the late reply back. I am currently looking for properties around the the northern half of Denver (Lakewood, Arvada, Broomfield, South Thornton and west Aurora). I am preferably looking for a 4+ bed 2+ bath just for bringing in more cash per room. The math on a 3 bed was not working in my favor to well with the houses I have found. From places I have found, i have figured I could most likely get $550- $650 per room.

    I was qualified at this time for $280k - $300K depending on the type of loan I decide to go after. My cash is very limited and doing major fixes without a 203K loan is pretty close to out of the question at this time.

    As far as numbers I am getting, I am usually around $2000 in mortgage payment per month. This is with properties that are between $275k and $300k. My cash flow has been around -$200 and -$500. 

    With this said, is it a bad situation buying a house that is right at my credit limit allowed? Any thoughts on that? 

    Thank you all again! I very much appreciate all the input! 

    -Taylor 

    1Reply
  • Taylor Burns
    OP
    Denver CO · Member since 2018 · 50 posts · 22 votes
    7y

    Correction! I was looking at my numbers, and I am more in the range of -$400 to -$800 cashflow on most of the properties I'm seeing. 

    Note: I am putting 5% in each of the values as far as vacancy, repairs, major fixes etc. Is this an accurate number to put for those? 

    0Reply
  • Aditya Maini
    Investor · Arlington, VA · Member since 2017 · 52 posts · 12 votes
    7y

    I am a newbie so I am not quite sure about this but wouldn't it make sense to not include you in the cash flow equation at all, and treat this as a standard rental property? You may decide to move away in a year or two, and when you do you will be in negative cash flow. 

    1Reply
  • Chris LopezPro Member
    Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
    7y

    @Taylor Burns Can you post your analysis? It's hard to give specific feedback without seeing your analysis.

    Is that negative cash flow while you're living there? Or once you move out?

    As at @Matt M. pointed out, look for 4+ bedrooms is going to be your best bet play in the current Denver market. Rent out room by room. 

    Podcast Guest on Show How to Use Equity in Your Home to Reach Financial Freedom Faster
    0Reply
  • James Carlson
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    7y

    @Taylor Burns

    Have you considered Airbnb for your extra room? That could double your income for one of the places and might make those numbers start to make sense. We've certainly seen some of our Denver and Colorado Springs clients utilize Airbnb to house-hack with success. 

    You have to be careful that you're not buying in an HOA-governed community -- be it neighborhood or condo building -- because they often have restrictions on short-term rentals. But otherwise, it's a great way to boost your rental numbers. (Also a great way to learn how to do laundry and scrub a toilet every four days.)

    0Reply
  • Lizzie Carver
    Rental Property Investor · Denver, CO · Member since 2017 · 51 posts · 39 votes
    7y

    Taylor - As Dan mentions above, DEFINITELY explore the HomeReady/HomePossible programs with your lender. If they aren't familiar with them, find a lender who is familiar with these and other programs. Essentially, you can get big benefits from buying in areas designated as lower income--some with income restrictions and some without. We just used this for our first duplex in Denver and I'm happy to put you in touch with our lender if you can't find one that can help with this. If you want to send me your analysis, I'm happy to give it a look as well and see if you're missing something/being too aggressive on your assumptions. Get this down as best you can, as quickly as you can, know your target and pull the trigger when you find it!

    Lizzie

    1Reply
  • Taylor Burns
    OP
    Denver CO · Member since 2018 · 50 posts · 22 votes
    7y

    View report

    *This link comes directly from our calculators, based on information input by the member who posted.

    I don't know if this will work with the link, but here is a deal that i ran some numbers on. I am running the numbers with me taking into account that I will be living in one of the rooms. I am estimating around $600 per room in costing things out. That is putting this property bringing in $1800 with me in the residence. 

    @James Carlson I have not explored the whole air bnb option for my rooms yet. I was thinking more of a month by month lease type agreement with people living with me. But if Airbnb can help increase revenue I would absolutely like to look into that.

    @Chris Lopez I just copied and pasted the this link above after i clicked share in forums. So hopefully the hyper link works. 

    @Lizzie Carver Thank you for looking out! I am going to do some research on those loans and will keep you as a reference for finding that type of lender. 

    Thank you! 

    0Reply
  • Lizzie Carver
    Rental Property Investor · Denver, CO · Member since 2017 · 51 posts · 39 votes
    7y

    What are your monthly expenses comprised of? Is your plan to rent the bedrooms out for a gross $600 or charge for utilities on top of the $600? Right now, your expenses are far exceeding your income—assuming you feel good about the $600/room, for his to work you’ll either need to find a way to reasonably tighten up your expense assumptions and/or increase income. From the description it sounds like there may be an opportunity for you to rent the 4th bedroom and live in either the basement or bonus room? Lastly, would you say all of the bedrooms are about the same size or is there a master that might be larger/have an en-suite bathroom or other premium features where you could increase rent?

    0Reply
  • Lia MartinezPro Member
    Rental Property Investor · Denver, CO · Member since 2015 · 80 posts · 68 votes
    7y

    @Taylor Burns- Great post!

    I've been house hacking in the Denver area for a while. My present house (purchased 8 months ago) and past 2 properties were house hacks. I lived in each one for 1-2 years before buying another and I continue to manage them myself. These are all currently rented by the room (I have 4 housemates currently because my present primary is under rehab, so the final 3 rooms are still being finished). 

    I look for SFR properties with 6 bedrooms or more with at least a 3 beds to every 1 bath ratio and ideally a second kitchen or ability to add a second kitchen. I try to also make sure there is a good amount of room for the communal areas and 2 washer/dryers. This is my idea of offering affordable housing/communal living in the central Denver area while also making significant cash flow. 

    My prior home, for example, is currently renting at $675/room. It has 6 bedrooms and my mortgage with utilities, insurance, and internet included comes to just under $2000/month. My net cash flow is around $2000/month on that one house. It does require a lot more hands-on property management on my end, especially because I'm renting month-to-month. 

    Given that the current group housing laws in Denver are restrictive (no more than 3 unrelated people can live in one home), I try to make friends with the neighbors and encourage bike-use instead of cars. A Denver focus committee is in the process of re-working the group home rules now, so we will see what they come up with (licensing may be in the future). As a Plan B and to follow up on what @Aditya Maini mentioned, I've also calculated rents as if I needed to rent the whole property as one unit to be sure the rent would more than suffice if needed. 

    If you would like to talk more in depth about what neighborhoods and property types I look for, let me know! I love talking about this system. It provides a service to the community with affordable housing and communal living while also bringing in a lot of cash flow. 

    1Reply
  • Martin Potter
    Specialist · Denver, CO · Member since 2017 · 46 posts · 19 votes
    7y

    @Taylor Burns

    Just replace your debt with some Airbnb arbitrage profit. I have 4 now and they have almost replaced all of my monthly expenses. The potential is huge with just a little bit of specialized knowledge. Also, reducing your exposure by applying the velocity banking strategy on the property you plan to buy could completely change the numbers from negative cashflow to positive in just a couple short years. Let me know if you want to talk it out sometime. I'm always looking for sharp individuals to collaborate with on deals here in Denver. Otherwise, good luck with everything! 

    0Reply
  • Bryan Nykerk
    Rental Property Investor · Denver, CO · Member since 2016 · 6 posts · 2 votes
    7y

    Great post @Taylor Burns!

    I just found this post and thought I'd chime in because I only saw responses with advice on typical house hack scenarios - such as renting out rooms in your house, buying a duplex, etc.  I've done both of those, and they can be great investments for sure, but they both have drawbacks. 

    Buying a house with as many BRs as possible, and then having friends move in and rent bedrooms is they way I started out. It can feel a little awkward since you're basically living with those that you're expecting to pay your mortgage. So I always ended up towing the line between my personal finances and my friendships. It worked for a while, but it wasn't extremely profitable for me. I really liked @Lia Martinez's idea though. Denver needs more of this, for sure.

    Buying a duplex and living in half is a great option, but it's hard to make the numbers work these days due to competition with other investors and people looking to do the same thing as you. Same story buying a house with an ADU.

    But there's another option that's slightly more off the radar if you're intending to live there too. @James Carlson brought it up, and I think he's got the right idea, because you will get more revenue this way...and if done right - not too much more work.

    We just bought a house and finished a rehab to convert the basement into a short term rental with a private entrance. The private entrance is key. We now live upstairs and rent out the basement on airbnb. As long as you live in the house, Denver allows you to do this, and the licenses and taxes are super cheap. We have some STRs in Breckenridge as well, and let me tell you - those fees and taxes are INSANE. Denver's taxes and fees are very reasonable.

    It's a 1 BR 1 bath, with a full kitchen and a separate entrance, so our place attracts travelling nurses, corporate guests, house hunters, and a lot of grandparents coming to visit their grandkids that live nearby. They are great guests, fun to host, and not as price-sensitive. 

    Going from long term to short term boosted income by about 30% for us. And now this arrangement almost covers our mortgage. The most important things are: neighborhood and location (when are they not?), having a private entrance, having a corner lot (easy access from street to entrance), and establishing yourself as an airbnb superhost as soon as possible.

    Good luck!

    1Reply
  • Taylor Burns
    OP
    Denver CO · Member since 2018 · 50 posts · 22 votes
    7y

    @Bryan Nykerk,

    Thank you for hopping in here! I think that is some great advice especially coming from someone doing it in the Denver area. Doing the Airbnb thing has not been high on my list, but after looking at properties for a couple months now and seeing the numbers, it may be worth re-visiting. Do you look for houses with two kitchens? Or is this something you do as a renovation? 

    Running the short term rental could durastically increase profits with not too much extra work since I would be living at the residence.

    Thank you again for the input! 

    0Reply
  • Bryan Nykerk
    Rental Property Investor · Denver, CO · Member since 2016 · 6 posts · 2 votes
    7y

    @Taylor Burns -  Looking for a house with 2 kitchens will certainly decrease your runway to getting up and running...but it's dependent on how comfortable you are with doing the renovations needed. If this is your 1st time, you would probably want to hire it out. But construction costs are super high right now. Sometimes basements come with a wet bar, which means you'll likely already have the plumbing needed, so that could be a lower cost option for you if you're a capable DIYer.

    I always start by researching the areas I'm looking to buy. Search the area on airbnb, and see what places go for per night/week/month, and compare that to postings on craigslist for long term. STRs tend to be much nicer, so the rehab cost is much higher initially. But this helps get an understanding of the market demand for short-term vs. long-term in various areas, so I can fine tune my revenue estimates. 

    There are certainly opportunities to make money doing this here in Denver. And since Denver smartly restricts airbnb to owner-occupied homes, big money can't play this game. The only downside is that it does take a little more effort. But it seems like you're not scared of rolling up your sleeves. :-)

    Let us know how it goes!

    0Reply
  • Lia MartinezPro Member
    Rental Property Investor · Denver, CO · Member since 2015 · 80 posts · 68 votes
    7y

    @Taylor Burns 

    @Bryan Nykerk

    Another concept that is growing fast is developing Coliving Homes for the Digital Nomad community and/or working professionals. Check out Coliving.com or the Coliving Hub for more information. This involves buying a larger home in the city center and then renting it out by-the-room for a higher price per room than you would generally get for typical housemate situations. 

    The residents are willing to pay more because you create a community of like-minded entrepreneurs and professionals who travel the world while working. They generally range in age between 25 to 45, require solid wifi, a central location, large communal areas, and stay from 1 month to a year. 

    0Reply
  • Bryan Nykerk
    Rental Property Investor · Denver, CO · Member since 2016 · 6 posts · 2 votes
    7y

    Just found this zoning map that shows where ADUs can be built in Denver, and thought I'd share. I know the ADU route is usually cost-prohibitive numbers-wise, but it's still and interesting to see where Denver says you're technically allowed to build them - and where you can't.

    https://denvergov.org/Maps/map/accessorydwellings

    @Lia Martinez

    @Lia Martinez - I'm going to reach out to you if that's OK. This is a concept I've actually been working on - and just lost a bidding war on an opportunity recently. :-(

    0Reply
  • Chris LopezPro Member
    Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
    7y

    @Bryan Nykerk It's not just the cost of the ADU's, it finding GC's that have experience and want to deal with ADU's. I'm in the works for doing some marketing with a GC who is focusing on ADU's. He's shared some stories about the "learning curve" that he and others have gone through on building ADU's.

    He shared some stat that only like 4 GC's have built more than 1 ADU in recent years. I might be getting that exact stat wrong, but you get the gist.

    Podcast Guest on Show How to Use Equity in Your Home to Reach Financial Freedom Faster
    0Reply
  • Paul M.
    Member since 2019 · 21 posts · 7 votes
    7y

    The US has so many houses with big basements, perfect for home hacking. If you can find a property with a tall basement that needs a reasonable amount of work to turn in to an income property. That will be a great first property. 

    In the UK basement properties tend to be larger houses that are a lot more expensive. I think in some areas in the US even mid and lower end properties have basements. 

    0Reply
  • Lia MartinezPro Member
    Rental Property Investor · Denver, CO · Member since 2015 · 80 posts · 68 votes
    7y

    @Bryan Nykerk I love talking about Coliving and House Hacking. Please feel free to reach out anytime. 

    0Reply
  • John Mayer
    Real Estate Agent · Denver, CO · Member since 2019 · 45 posts · 44 votes
    6y
    Originally posted by @Bryan Nykerk:

    Great post @Taylor Burns!

    I just found this post and thought I'd chime in because I only saw responses with advice on typical house hack scenarios - such as renting out rooms in your house, buying a duplex, etc.  I've done both of those, and they can be great investments for sure, but they both have drawbacks. 

    Buying a house with as many BRs as possible, and then having friends move in and rent bedrooms is they way I started out. It can feel a little awkward since you're basically living with those that you're expecting to pay your mortgage. So I always ended up towing the line between my personal finances and my friendships. It worked for a while, but it wasn't extremely profitable for me. I really liked @Lia Martinez's idea though. Denver needs more of this, for sure.

    Buying a duplex and living in half is a great option, but it's hard to make the numbers work these days due to competition with other investors and people looking to do the same thing as you. Same story buying a house with an ADU.

    But there's another option that's slightly more off the radar if you're intending to live there too. @James Carlson brought it up, and I think he's got the right idea, because you will get more revenue this way...and if done right - not too much more work.

    We just bought a house and finished a rehab to convert the basement into a short term rental with a private entrance. The private entrance is key. We now live upstairs and rent out the basement on airbnb. As long as you live in the house, Denver allows you to do this, and the licenses and taxes are super cheap. We have some STRs in Breckenridge as well, and let me tell you - those fees and taxes are INSANE. Denver's taxes and fees are very reasonable.

    It's a 1 BR 1 bath, with a full kitchen and a separate entrance, so our place attracts travelling nurses, corporate guests, house hunters, and a lot of grandparents coming to visit their grandkids that live nearby. They are great guests, fun to host, and not as price-sensitive. 

    Going from long term to short term boosted income by about 30% for us. And now this arrangement almost covers our mortgage. The most important things are: neighborhood and location (when are they not?), having a private entrance, having a corner lot (easy access from street to entrance), and establishing yourself as an airbnb superhost as soon as possible.

    Good luck!

    Great insights! The private entrance basement airbnb makes a lot of sense, and I have friends who have also reportedly made this strategy of househacking work. How has your experience been with keeping the unit booked? And how much are you pulling in on average?

    1Reply
  • Bryan Nykerk
    Rental Property Investor · Denver, CO · Member since 2016 · 6 posts · 2 votes
    6y

    Well, we have 3 short term rentals - our basement in Denver and 2 condos in Breckenridge - all in great locations for visitors. But the 2 in Breck do way better cap rate-wise because they're ALWAYS booked, and for much more per night than Denver. So if you're buying a house in Denver anyway and looking to subsidize your living cost, house hacking is great...but it's honestly not a fantastic investment otherwise.

    1Reply
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