Denver Market House Hacking Location Recommendations

11 Replies

Hello everyone my name is Angie DeNardo and I am fairly new to the Bigger Pockets forum. I will be relocating in early 2020 to the Denver area from Philadelphia. Instead of throwing my money away renting I would like to get involved in real estate. I have been reading books, listening to podcasts, and networking for about six months. I am targeting the house hacking strategy.

Does anyone have experience house hacking in or near the Denver market?

Where are locations/neighborhoods you would recommend for house hacking? I have no commute to the office... just to the airport. I am looking for a class B or C location that is turning into a class A location ideally.

Thank you in advance for your insights!

Hi Angie welcome to the forum and (preemptively) welcome to CO. When I first moved out here I got started with a house hack and it was a life changing decision so I highly recommend it. Denver is a big city so which part to land in is kind of a difficult question to answer without more info about you. 

The most important piece that will dictate which part of the city I'd recommend would be budget, as Denver has gotten pretty expensive so price is often the biggest limiting factor in getting started. If you're not sure on your budget, the place to get started would be talking to a mortgage broker to see what the max loan amount you would qualify for is (sorry if this is too obvious and elementary, and you may be paying cash because money is no object for all I know, but my assumption would be that you'll take advantage of the low money down financing available for owner-occupied which is a big advantage of house hacking, and that your price point is entry-level so I'll base my advice on that).

 For a house hack you'll want a larger size house like a 4/3 to fit all those housemates who are paying your mortgage, so that combined with being close to DIA and B/C area becoming an A makes me think of Fitzsimons neighborhood of Aurora near the Anschutz Medical Campus, and the surrounding area. There are some larger houses in that area for reasonable prices still and although it's not real swanky right now it is developing fast so it's got upside potential, and super close to DIA. Stapleton and Lowry are equally close to DIA and connected via RTD's A-line commuter rail service which is very convenient, but that neighborhood is already considered an A area and fairly expensive so not sure if that fits your budget/investment plan. You might be able to find something just on the outskirts of the newer part of Stapleton that hasn't skyrocketed in price yet, as there are some blocks of older, less expensive homes kind of mixed in with the fancy new townhomes around there, but mostly smaller homes. Gateway/Green Valley Ranch is another area very close to DIA where one can buy a large house at a low price-point compared to the rest of Denver metro, however I wouldn't recommend GVR for various reasons. 

Another big factor will be how rough of a hood you're willing to live in. You mentioned B/C but the C areas can be pretty off-putting, so I'm guessing when you visit them you may pivot more towards B areas. However C areas do offer the lowest price point and perhaps the biggest upside potential if you choose wisely and predict the path of progress accurately, so you have to strike a balance that only you can really make a judgement call on. Again a lot of it comes back to budget combined with personal tolerance for things like crime and proximity to industry as the east side has a lot of gross polluted areas and crime. It also depends on how long you have to wait for an area to turn around. There are some C areas near DIA that are turning a corner quickly: Cole, Mayfair, and even parts of Commerce City spring to mind in this category, but you'd have to see them for yourself as not everyone will be attracted to those areas. 

I prefer the west side of town myself as I like having quick access to the mountains personally and many people in Denver are like me and prefer to be close to the mountains. That increased demand combined with the geological barrier to development created by the mountains is driving appreciation more on the west side in general, whereas out east Oakwood Homes is banging out new cookie-cutter homes willy-nilly across the plains as far as the eye can see, so there isn't any limit to supply (one reason I wouldn't recommend GVR). So if appreciation potential is of primary concern, you may want to sacrifice the convenience of being close to DIA in order to open up the option of being on the west side. Anyway some thoughts to get you started. 

One more thought is you may actually just want to rent for a little while until you get familiar with the different parts of the city, and look at a ton of properties during that time in order to familiarize yourself with the housing market. Good luck!   

@Angie DeNardo Hi Angie, I'm a local Denver investor that is on my third house hack, so I know it can be done and can answer any questions for you.   

In 2019, finding Class B/C areas that are turning to A areas is a challenge though because that is a lot of speculation and most of those areas are now closer to B have A price tags (ex. Cole/Five Points neighborhood). 

If I was starting new and not knowing any neighborhoods and I wanted to house hack, I would spend time time driving through these neighborhoods to get comfortable and see if you could live there for one year or more.  Drive around at night and during the day to see how it is.  Also, go to a few meetups and talk to some local investors and see what neighborhoods they personally like or dislike. 

If you have no job to drive to, then you have a lot flexibility. Denver metro includes the surrounding suburban cities.

As Steve mentioned, I also like the west side of town which is defined as west of I-25 interstate. It is one of the last affordable parts of town while still close to downtown Denver, the mountains, Red Rocks, etc. 

Regarding Denver neighborhoods, here's my personal favorites:

Villa Park, Barnum, Westwood, Athmar Park, Harvey Park, Ruby Hill.

Villa Park is interesting because some of the scrap and builds are coming down there from Sloan's Lake area, so you have these older homes from the 50s and 60s and then a couple of new builds, so that is one neighborhood that is trending from C to B sooner.  

All of those other neighborhoods are closer to C, but long-term they can definitely become B due to benefiting from Denver appreciation over time. 

Also, all of those Denver neighborhoods are still reasonably affordable relative to other Denver neighborhoods, so you can still make the numbers work on a house hack.

Outside of Denver, but still close by, the cities of Lakewood, Wheat Ridge, Westminster, Northglenn, and Thornton. Each of these cities are close to downtown, some are Class B already, some Class C, but each one will have options for good sized houses to house hack. 

I agree with Steve that it might be a good idea to rent for six months and then use that time for educating yourself on finding the best location for your first deal. 


 


 

As everyone else has said, rent first. Check on craigslist and sublease for a few months to get a feel for the area. Price will dictate the areas most. If you can stay near the A line, the train to the airport will work. 

Hello Everyone, 

@Matt M.  @Jeff White @Steve K.  

Thank you for all of your detailed insights. I really appreciate it! I took your advice, and I have started looking for a month by month lease starting March 1st. My budget is under $450K but I would be more comfortable with it being closer to $350K. The amount I would be willing to pay would be dependent on location and number of bedrooms/bathrooms. Since I work remote I do not mind being on the east or west side of Denver. I also love going to the mountains, so I would prefer being on the west side of Denver, as long as there is potential for house hacking in those areas. Jeff, I will start attending the meetups as soon as I move to Denver. I know that will help me feel more confident about choosing the right location to buy my first investment property. 

On a side note, do you ever fear that there is a housing bubble in the Denver area? Housing has rapidly increased over the past years. Are you ever fearful there will be a housing bust? 

Your budget puts you solidly in range of the median sold price of 2019, which is looking to be around $420k. You'll have a lot of options in B/C areas in the $350-450k price range.  

Regarding the market: we're certainly not seeing the double-digit gains we were a few years ago. Home values have gotten to a point where median income earners are having trouble affording a median priced home. Typically when an affordability problem comes into play, there are less buyers in the market, causing it to flatten. Most data I've seen predicts we'll be up ~1.5% by the end of 2019, and down ~0.5% in 2020, so we're seeing a slight correction for sure. I don't anticipate a crash or even a sustained drop however, as the market fundamentals are sound: increased job and population growth combined with limited supply will continue driving prices up over time. We currently have about 1-2 months supply which is far less than what is considered a balanced market, meaning we're still technically in a seller's market, with average days on market still well under a month. But buyer's are getting some breathing room now and next year may even be considered a buyer's market for the first time in close to a decade.

 Long term, I'm bullish on Denver as the factors that have driven appreciation thus far: population growth and tight supply, are likely to continue. It's a city on the upswing with a lot of attractive features. I predict we'll see a plateau with maybe even a slight dip in some areas over the next year or so, and then back to gains after that, albeit probably more modest gains than we saw over the past 7-8 years. So 2020 should be a great year to buy!

Hey @Angie DeNardo ! I sent you a message, but awesome that you are moving to Denver. Overall, I think everyone is bullish on Denver. People are moving here in swarms and don't tend to leave. 

Personally, I have done three house hacks all in the northern part of Denver and the northern suburbs: I have property in Skyland, Thornton, and Sherrelwood. In my opinion, it seems that the south is pretty much developed. You have the Denver Tech Center and Denver University down there and house prices have already shot up. In the North, they are still building. There are two or three humungous structures going in the River North region. There are also plans to put in a world trade center in the Northern part of Denver. 

What does that mean? It means there are going to be a whole bunch of jobs flocking to that area and people are going to want to live close to where they work. Not only that, but the tens to hundreds of thousands of millennials that have moved here in the past 5-6 years are aging a bit. They are likely going to be moving out of the city to start families. The properties in the suburbs North of Denver have not quite exploded like the rest so all signs seem to point at people moving and buying houses there. I believe there is only a matter of time. 

Yo @Angie DeNardo ! Welcome to Denver! Denver is also a great city for STR on Airbnb (has to be your primary residence). Wouldn't make it a permanent long term strategy because of the ever changing laws but for now it's great and something to consider if you're looking to juice your returns. It could also be an option if you decide to go to the top of your price range and grab something with an awesome location.

Good Afternoon @Steve K. @Craig Curelop @Marcus Roberson

Thank you for sharing your knowledge. I feel more reassured about the market, and I am hopeful that 2020 will be a good year to purchase my first house hack! Ideally, I plan to find a home that has a finished unit in the basement, or a slightly finished unit in the basement. I will rent by room the top unit, and I plan to live in the basement with my boyfriend. When we are traveling for work or spending time on the weekends in the mountains I plan to rent out our basement unit on Airbnb. I currently am a Airbnb super host. We rent out our Philadelphia apartment, where we current live, and I absolutely love hosting Airbnb. I understand Denver’s laws only allow residents to list a home if it’s their primary residence. So I only plan to use Airbnb if I am living in the home.  

I do have a question about zoning. Ideally I want a home where after a year we can move out and I can rent out the basement unit separately from the top unit. Does this require different zoning than a traditional single family home? I want to be able to qualify for a conventional loan, so I do not think I want to purchase a property zoned as multi family unless the bank will give me a conventional loan for the property. Ideally I do not want to use an FHA loan on my first house hack.

Any insights you can provide about zoning would be much appreciated! Thank you! 

I just undertook this same mission in 2018. First, I recommend the FHA 203(b) loan - lmk if you need a lender/realtor. 3.5% down is impossible to beat. The rates are reasonable. SFH limit is over $500K and the duplex limit is over $700K. It's pretty much impossible to make tri- and four-plexes work in the Denver market today as they underwrite them assuming a 75% occupancy, and don't consider your personal income as heavily.

I spent a LOT of time looking for assets in the $400 range, but landed in an asset in the $700K range.  The reason was that the assets in the $400K range were located in neighborhoods with much lower rental rates.  At the end of the day, I landed in an expensive core neighborhood, BUT the rents IN-PLACE at the house were enough to cover most of the mortgage.  I obviously moved in, and am paying one of those rents today, but with a roommate it's very reasonable.  Dream big - especially with two of you paying the "rent" on the unit you're living in.  Use zillow and other sites EXTENSIVELY to analyze rents in the neighborhoods you're considering.  If your two units will each rent for about enough to cover the mortgage pmt,  you can feel confident in your purchase rain or shine.  Rents don't give as much ground (if any) in a recession as housing prices do.  That's why the comparison of Rent > mtg pmt is so crucial.  

Zoning - Get used to the Denver Assessor's office website. Anything in a zoning designation "SU" stands for single unit. Some of these allow ADU's and mother in law units - most don't. Also, you can consider buying a non-conforming building (where someone added a MIL suite illegally) and you'll get a good price. Just like the person you sell to down the road will. Look for Zoning "RH", "MU", "MX" and "TU". These are some of the Denver zoning designations that allow multi-unit dwellings.

Good luck.  Please reach out with any questions.

@Angie DeNardo

I do have a question about zoning. Ideally I want a home where after a year we can move out and I can rent out the basement unit separately from the top unit. Does this require different zoning than a traditional single family home?

Basement units and mother in law suite in a single family home can't be rented legally as separate units when you move out. You have to check more than zoning too because they are typically unpermitted as well. Some investors care and some don't. I know a lot of people with properties like that, the rule of thumb is to be nice to your neighbors!

All the west neighborhoods are great- Westword, Barnum etc.  You can get away with a lot there cause everyone is renting their garage that has an ac unit in it to their cousin.  
I would seriously consider buying an RV 22’ or less and parking it in the backyard for extra income!   
West side of Baker (my hood), Santa Fe arts district has some things in your price range and is great location.  
I have done well with Airbnb, ADUs and renting everything I own to get ahead in real estate and now it is my full time job.  Lots of str opportunities here.  
Denver is hot for real estate and will continue to be.  

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