What Would You Do With $1MM in Denver This Winter?

7 Replies

Greetings! New to this forum and looking for some suggestions.

I currently live downtown Denver in an apartment I own. There’s roughly $50k left on the mortgage and could easily be paid off (worth roughly $250k). Plan is to hold on to the apartment long term and rent it out. Getting married in May- combined income hovers around $250k (if that matters).

In addition to a major repiping project, we’ve outgrown the apartment and are ready to make a move come early next year. It’s beyond time.

The market isn’t great right now, but we’ve been approached by a family friend with a proposition. She has a lot of cash off hand, and would like to give us an Intra-family loan for a house which runs at about 2.3%. If we can find the right investment, we could get up to $1MM to leverage. It’s lower cost and lower risk than any sort of traditional financing.

There are a lot of approaches to take with this much money, but whatever approach we decide has to incorporate a liveable space for the wife and I. We’d like to stay in Denver proper, which limits our options. This would also be a long term property to include in our small portfolio, so we’d be here for a few years max before renting it out. In other words, we’re trying to figure out a hybrid living space that we can add some investment opportunities to.

Here are the options I’ve outlined:

  1. Traditional duplex
  2. SFH with a basement to convert to a small lower apartment
  3. SFH with correct zoning for an ADU (Alternative Dwelling Unit- more reading here:
  4. Pre-purchase two townhomes from a developer before they go on the market

What would you do? Are these options actually feasible in Denver proper with that amount of money?

Hi @Dylan W.

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@Reed W. so it really depends on you and what you want to do. I would say that pre-purchasing a townhouse from a developer would not be on my list. If you have $1M then you can probably buy more than a duplex but it also depends on what part of Denver proper you want to live in. It also depends on what you want for your living quarters as far as condition is concerned. Generally speaking, owner occupied finishes are more expensive and you will pay a premium for properties with those finishes.

I'd look at the plexes. Buy one with her funds and see how it goes. Then refi her out to rinse and repeat IF you like being a landlord. I would avoid going for a new build. Make sure to talk it over with your fiancé obviously. Once you have kids, it may be time for a home with an ADU that you can airbnb.

If you like Cap Hill area, I have been looking recently and there are some multi-units in old mansions. I have seen a few with nice family spaces on the main level and 1-2 bed units for the other units. Would be happy to chat more if you are interested. Sounds like a fun opportunity!

Best,

Stacy

@Reed W.

Well, that's not a bad situation to be in. ;) Not every day someone offers you that kind of money at that kind of rate. And not to stroke your ego too much, but it seems like you're thinking about it in the right way. A couple thoughts:

  • I'll share my thought on your investment strategies below, but I'd say the first thing you want to do is have a serious conversation with your partner. We work with a lot of clients (male clients) who want to get a Denver house with a basement apartment for either long-term or short-term renting like Airbnb. The ones that actually work out are the guys who have their spouses on board. I don't mean to stereotype here, but often times, the guy is gung-ho for the investment piece of it, while the woman's top priority by a long-shot is simply the comfortable space to live. My wife, and business partner, @Erin Spradlin runs a women's investment group if your partner were ever interested. 
  • Of your options, I like the first three. (New builds are overpriced and won't nab you the rent you need to make it a good investment.) At your price, a duplex or home with a mother-in-law suite is certainly an option. There're a few nice ones right now in the central Denver area -- Cap Hill, Uptown, RiNo, Sunnyside, Highlands, etc.. Be sure to work with someone who knows the zoning laws and lot size requirements around duplexes and homes with basement apartments. And you definitely want to know that when you're looking at homes one which you think you can build an ADU.
  • Just in general, try to be as clear as you can on your goals. That means you, your partner and your agent all being on the same page. You've got some great options, and all of them are within reach at that price point.

Good luck!


All of the respondents had good input. Having owned several of each type, in my experience over/under (basement) apartments don't rent or sell quite as well as do side-by-side duplexes or ADU properties. Sometimes downstairs tenants are just a little bit too close. If you can find it, a side by side existing duplex that you can occupy part of for a few years will make a nice portfolio piece down the road.

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