Relo to CO, 5 doors already, seek 80/10/10 mortg +recommendations

Lindsey Z. · 2020-02-07T13:24:36-08:00

Hello BP, kindly seeking advice on 2 things: 1. best neighborhoods North/West of Denver, CO for long term appreciation and a good first time Colorado experience2. lender recommendations for an 80/10/10 programMy husband and I live in Orange County, CA and started listening to BP 2 years ago. 29 and 32 y/o. Portfolio:A duplex in Oklahoma city - 100% occupiedA half-duplex in Oklahoma city - 100% occupied for more than 1% ruleAn SFR in Casper, WY - occupied by family at a good rate with very little vacancy riskA townhome in Anaheim Hills, CA 3BR/3BA that has been our primary residenceWe just received an offer to move to the Denver area where my company's second largest office resides. Many if not all of the relocation expenses will be taken care of and husband already has job offer as well. The dilemma - Colorado, although cheaper than CA, is not cheap!Our plan was to buy 3 more doors this year, and we will be renting out our townhome in CA. It may drag between 0 and -$250 in negative cash flow but we want the option to move back as well as it's in a high rent area so if we can see it through to payoff (we are long term holders) it's a cash cow in retirement and it'll be paid off in our fifties.Here's the plan we've been hatching:1. use an 80/10/10 to buy an SFR in Colorado as new primary residence - keeping an eye on the 1% rule but knowing that this won't be a rental for at least 2 years, the reason we wouldn't be putting more down is houses are in the $350-450k range and we want to reserve enough cash to stay on track for #2 below. the piggyback would let us avoid PMI but also pay off the balance at our leisure with the added bonus of keeping a HELOC open as well. 2. Continue to buy 3 doors as we had plannedWe don't want to rent in CO (we have a large dog, and outdoorsy vehicles/tools/etc). We have very high W2 incomes that allow us to continue to qualify for mortgages. Thoughts and constructive criticisms are welcome.Cheers!

Anson YoungBusiness Member

Flipper/Rehabber · Denver, CO · Member since 2009 · 1k+ posts · 726 votes

6y

Lindsey, sounds like you are off to a great start already! Welcome to CO!!

Fair warning for Denver metro area... 1% is tough to find.

The areas I like best that are North/west of Denver are: Arvada, Westminster, Erie, Boulder, Sunnyside, and Golden.

With your incomes and track record, finding an 80/10/10 lender shouldnt be too hard, 1st bank has some programs, as do a few others - If you need more recommendations just shoot me a PM.

I think your plan is solid from what you have told us!

Anson

Podcast Guest on Show #235

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Kerry BairdPro Member

Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes

6y

PNC Bank offers an 80/10/10

1 Reply

Steve K.

Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes

6y

@Lindsey Zibell I would look at the Golden area for your primary: quick access to the mountains, charming quintessential “Colorado” downtown, schools are pretty good and getting better, high chance of appreciation. There are also good neighborhoods nearby to pick up some investment properties, although 1% rule is going to be tough to hit and the $350-450k price range is going to be slim pickings and highly competitive (due to the affordability issue here the entry-level price range is far and away the highest demand market segment). Instead of 3 of those I’d go after a multiplex of some sort personally: much easier to meet the 1% rule with those, and better suited for cash flow investing long term. With high W2 income and experience investing you should be able to qualify for a commercial loan (5 units and up). Otherwise your plan sounds reasonable, and I’d be happy to refer you to some good local lenders. Welcome in advance to Colorado!

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Lindsey Z.

OP

Rental Property Investor · Southern California · Member since 2018 · 4 posts · 2 votes

6y

@Anson Young thanks for the tip on 1st bank! Arvada is definitely on our list, it's difficult for us Californians to get a pulse on the traffic situation because it's all relative. I've heard there is traffic but 10-15 mins is negligible to us.

@Kerry Baird I'll check out PNC too

@Steve K. agreed the 1% rule seems impossible. There isn't that much by way of multiplexes that I can see (on public listings). Loopnet has a lot of retrofit duplexes but that middle range of 5-10 I agree would be ideal. I didn't specify in OP but the 3 doors wouldn't have to be in Colorado. We want to take advantage of a primary res mortgage while we can in CO which makes it advantageous to buy, but we may be looking at more WY or OK properties. From what I can see CO will be about the appreciation more than cash flow, both important.

Thanks all, maybe see you at a meetup sometime hoping to find the occasional good one!

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Steve K.

Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes

6y

Originally posted by @Lindsey Z.:

@Anson Young thanks for the tip on 1st bank! Arvada is definitely on our list, it's difficult for us Californians to get a pulse on the traffic situation because it's all relative. I've heard there is traffic but 10-15 mins is negligible to us.

@Kerry Baird I'll check out PNC too

@Steve K. agreed the 1% rule seems impossible. There isn't that much by way of multiplexes that I can see (on public listings). Loopnet has a lot of retrofit duplexes but that middle range of 5-10 I agree would be ideal. I didn't specify in OP but the 3 doors wouldn't have to be in Colorado. We want to take advantage of a primary res mortgage while we can in CO which makes it advantageous to buy, but we may be looking at more WY or OK properties. From what I can see CO will be about the appreciation more than cash flow, both important.

Thanks all, maybe see you at a meetup sometime hoping to find the occasional good one!

You're right there are not many MF's on the open market here. I have found a few right off the MLS, they do come up occasionally but not easy to find. Also if they're listed on the MLS the seller is looking for top dollar, but that doesn't mean deals can't be found. There are a handful of commercial brokers in Denver who control most of the MF market and most of their deals are traded off market. The best deals I've found came from my personal network and from contacting multifamily owners directly and asking if they were looking to sell (owners that I knew had owned the building for over 30 years). Now that I've bought a few MF's I have the commercial brokers calling me so I'm seeing more deal flow.

1% is hard to find but honestly my own experience has been an inverse of the 1% rule: the one property I purchased at .5% is actually outperforming the one property I bought at 1% (the rest were somewhere in between). This is due to the deal purchased at .5% being in a great location, with high rent increases in just a short time period, very low vacancy/low turnover, and great appreciation. So I look for good location above all (likely to appreciate, high rental demand/low vacancy rate, good tenant base, rents likely to increase). Secondly I look for good "bones"/physical condition to keep operating expenses down. The overall quality based on the whole picture is much more important to me than an arbitrary rent to purchase price metric which is often skewed by the seller fudging their numbers on operating expenses anyway. With this strategy it's important to have cash budgeted in order to ride out a year or two of low returns/even negative returns as I rehab, but if done right leads to big profits in years 3-5 with appreciation easily in the 6 figure range and great eventual cash flow thanks to rent increases. Principle pay down and depreciation tax benefits are also significant in this market due to high values.

I know a few extremely wealthy people employing this same strategy here in Boulder and they are crushing it despite buying properties that don't even come close to meeting the 1% rule. Of course they have the capital to ride out a few years in the red and absorb any additional capital expenditures before they start seeing returns, but as a long term strategy it's a great wealth multiplier. I haven't reached that level yet where I can break into the Boulder multifamily space. My approach is more of a "poor mans" variation of this same strategy because I'm looking in less expensive "up and coming" areas, as well as still doing much of the rehab myself. It's working well for me so far in Denver and some other areas just outside of Denver.

1 Reply

Deborah BurianPro Member

Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes

6y

If you can find a property, add Broomfield to your list, it's Boulder school district so very good schools but not as pricey, tho' not inexpensive, as some areas.

1 Reply

Catie Lawrence

Flipper/Rehabber · Arvada, CO · Member since 2019 · 63 posts · 47 votes

6y

Oh, you are going to LOVE Colorado!

My husband and I live near old town Arvada - a great area a bit west of Denver, with a light rail, great down-town area, plus city is only 15-20 minutes away, depending on where you're going. We actually have a house for sale (6482 Zephyr street, 80004) FSBO - check it out if ya want, no pressure! It is within walking distance of Old Town though!)

We move here from Philly 6 years ago and live about 2 blocks from said property - love the area! Reach out with any questions - beyond just questions about the house.

Cheers!

Catie

1 Reply

James Carlson

Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes

6y

@Lindsey Z.

Constructive criticism? That's what anonymous internet forums are for, right? ;)

Welcome to Denver! If you're not living in OC, then Denver ain't bad. Tons of sun, mountains nearby, good beer everywhere, great city itself with more bars and restaurants than you can take in, some pretty good arts and culture and the parks are amazing.

All the above towns work great for rentals -- Arvada, Westminister, Thornton (a bit more north, than northwest), Broomfield to a lesser degree. I personally like Arvada -- as does @Catie Lawrence apparently -- because it's up that way but unlike some other suburban towns, it has a cool little downtown with shops, bars and restaurants. (Golden's great too, but pricier too.)

Not sure how far down the rabbit hole you want to go, but you could also look for a place with some kind of separate basement for that first place and then do a modified house-hack to offset your mortgage while you're there.

About the 1% rule ... you're likely not going to find that here in Denver. Cash-flowing of any kind is tough around here. Unless you self-manage a rent-by-the-room model, which can definitely see some good returns. I tell people to see if they can cash-flow at all and then hold on to the property for 15 years and see what Denver prices are at that time. I know this is blasphemy on BP, but appreciation in a market like this is a bigger driver of returns by far than cash flow.

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Relo to CO, 5 doors already, seek 80/10/10 mortg +recommendations

Relo to CO, 5 doors already, seek 80/10/10 mortg +recommendations

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