I just moved to Denver a couple weeks ago and am looking at buying my first property to move into with my girlfriend. I'm still getting to know the area and any advice would be greatly appreciated.
My main two goals:
1. I want to "house hack" as much as possible, either airbnb, rent out a room or two, or on the off chance i'm able to find a duplex rent the other side.
2. I want to be able to break even (or even better = cash flow!) when I move out in a year or two.
So here are the areas i'm struggling, any advice would be really helpful!
1. What neighborhoods would you suggest?
2. Property: would a turnkey condo or townhouse be the right move especially for renting out later? Or should I be looking at single family homes? Should we be looking for B/A class turn key, or something that requires work? It seems a lot of these properties that require a lot of work are still priced very high and it doesn't make a lot of sense, so i'm considering if something more turn key and updated / ready to go may be the best move.
Looking for properties $400 and under.
I would really appreciate the insight in the local Denver area!
Some sort of multifamily is the way to go here. Why would you want to hold onto an asset that you only break even on after moving out? I would look for a 2-4 unit in an area that you at least feel safe living in that you buy at around a 10 cap/1%. So if you're looking to spend $400K on a duplex, each side should rent for $2000/month, totaling $4000 every month. I couldn't tell you anything about Denver's market specifically other than I know it's blowing up and I'm sure it has areas that are gentrifying/developing that would be great spots to get into.
Reach out to a realtor that specializes in finding investment properties. Chris Lopez seems to specialize in this here in Denver. Atlas Real Estate is a turnkey provider here in Denver that just offered a similar duplex to what you are looking for. You have lots of options just do your own due diligence.
@Cam Schumacher thanks for the mention. Yes, this is exactly what I specialize in. I have yet to find a better way to build a rental portfolio that requires low capital, low risk, and low time than house hacking and Nomading.
@Travis Hatch , here are some answers to your questions
1) It sounds like you've read that multis are hard to find. Yes, they are! It's worth looking at them, but not waiting until you find one.
I pulled some stats yesterday for an upcoming class:
Here’s why we are not buying many house hack multis:
*Lack of inventory.*
As of July 29, 2019, there are 36 multis below $750k in the Denver metro
*Want to use an FHA loan?*
Well, you need to find a seller who is willing to take one. Multi sellers are “king of the hill” right now. FHA’s come with much stricter health and safety requirements, many multis won’t pass snuff. Rather, they take a cash offer or investment loan. I don’t blame them. I would too if I was selling one.
*Find one with a vacant or soon to be vacant unit*
Did you know that owner-occupant loans require that you move into the property within 60 days? Guess what, if there is NOT a vacant unit or a unit with a lease expiring with in 60 days, you won’t get financing.
I could make a bigger list… but hopefully, you get my point.
Now, I’m not saying it’s impossible, but a lot of stars have to align to a house hack a multi.
For every one multi house hack that we help clients buy, we’re buying 10 non-multi house hacks!
Why are we buying single family house hacks?
*Lots of inventory.*
As of July 29, 2019, there are 2,330 single family properties that fit the loose house hacking criteria.
Since there is a lot more to choose from, we have a lot more success in getting one under contract!
Plus, we rarely run into the FHA health and safety issues or occupied issues. If we do, we can pick from the hundreds of others, rather then four other multis.
Buying a single family still reduces your living expenses or even allows you to live for free!
Most importantly, buying either as a house hack to eventually turn into a rental works for building a rental portfolio. That’s the punch line!
Airbnb and renting long term room by rooms both work. I'd focus on room by room rentals and not Airbnb. Airbnb rentals rates have decreased since last year and continue to face downward pressure (more supply coming online) Plus, Airbnbs are running a business! Make sure you run the numbers to determine if it's worth the time.
2. Yes, with certain types of properties in certain neighborhoods, you'll be able to cash flow when you move. One of the cons to house hacking is that cash flow is slim when you move out. But, the pro of putting 5% down or less outweighs it. Make sure you factor in depreciation benefits when you move out. You'll see a bump in your cash flow or see it turn from negative to positive.
On August 6th, we're teaching a class on the four ways you make money in real estate. It's great to know for house hacking. If you can make it, join us https://www.biggerpockets.com/forums/521/topics/731769-roi-quadrant-cash-flow-is-not-everything
3. RE: Neighborhoods. A lot depends on your budget, goals, and where you need to live for work. Areas we buy a lot:
- Lakewood (especially now that they passed that stupid bill that limits to housing stock)
- Areas in and around opportunity zones (we don't do the specific OZ investing, but ride the coat tails of big money coming in those areas)
- Southwest Denver (Ruby Hill, Athmar Park, etc)
- Arvada and Wheat Ridge
- Fitzsimons area (3 hospitals, and in an O Zone)
4. Your analysis is correct. Finding solid value add properties are very hard. We're often buying turn key or recently remodeled properties. For exactly what you said, the price difference is there for the headache, time and risk of doing major updates! While living there, do small upgrades to minimize maintenance issues for after you turn it into a rental.
Finding a property $400k or less won't be an issue. Most HH's we buy are ~$400k and the numbers work.
@Travis Hatch Also, I have some podcasts with HH clients and recent deal analysis. I'll PM you those. It's great info for you. Let me know if you ever want to connect to dive into details. This is the tip of the iceberg!
Following because I am also interested in investing in denver. @Chris Lopez great info! Will hopefully be attending the class on August 6th!
@Lyberti Reid Hope to see you there. I sent you a BP message with some podcasts.
@Chris Lopez wow, such great information! It's reassuring to hear. I'm going to go through this again and jump into the links you sent me and get back to you!
@Cam Schumacher - thank you for the reply and recommendation!
@Travis Hatch Great post, I have similar goals and just moved to Denver as well! This is all really good information!
@Travis Hatch My girlfriend and I are in the same situation as you, although we've lived here for 5+ years so been on the hunt a good while longer. We were just under contract on a duplex in Sunnyside that was projected to cash flow with 5% down. Our plan was to move in, rent out the nicer unit and fix up the one that needed work while we lived there. We didn't end up closing but my point is they're out there if you stay patient.
Here's a link to my first deal a year ago, hope it helps -
For areas the numbers cashflow wise work best in Englewood, Aurora, some Arvada, and ruby hill/Sheridan/arthmar(i don't really want to live there though).
I've seen a few properties under or around 400k with a small kitchen in the basement but they typically need work. Another idea is to keep an eye out for houses with a carriage house, live in that and rent the whole house out. If you don't mind roommates go with what Chris is suggesting, but my wife and I like our privacy. I have a friend who bought a 4 bedroom, rents out 2 and airbnbs 2 (he will sleep on the couch for $40 a night) and makes money some months even with 5% down.