Young BRRRR investor starting up in Fort Collins, Colorado

12 Replies | Fort Collins, Colorado

Hello all, 

My name is Jacob McMahon, I am 21 years old, currently studying at Colorado State University. I am ecstatic to be in the beginning of my FIRE journey, and to use BRRRR real estate investing to reach my goal of financial independence. My goal is to accrue 5-10 cash-flowing, single family homes in Fort Collins, Colorado in order to reach a point where the income generated from real estate allows me to quit my 9-5 and focus on more important world problems. I would love the opportunity to do my first property as a JV, hoping to get some experience under my belt with some guidance, before moving on to do the rest of the properties on my own. My current savings goal is to save 60k for a down payment on a JV property. I would love any savings advice to reach this goal as quickly as possible.

I am excited to join the Bigger Pockets community to gain knowledge, resources, and build a team. 

Jacob McMahon  

Jacob... do you own your own home currently? If not start there. Buy a house you can house hack and have roommates. At your age house hacking will pay off much better than BRRR. Cash-flowing rentals are hard to find in Fort Collins market these days. I also haven't seen a BRRR deal in Fort Collins that actually pencils out in quite a while. At best you can recapture your rehab costs when you refinance on a refi most banks only let you cash out 70% of ARV and typically require a 1 year seasoning period.

I'm local and happy to chat and connect you with some great local realtors and investment-friendly lenders when ready. 

Thanks for the response Ian! Currently I don't own my house, I am living with roommates. That is extremely valuable insight, I had no idea banks only let you cash out 70% of ARV. In Fort Collins, have you seen any benefits to house hacking a quad-plex vs. a house or vice-versa? I imagine with the U+2 law it could be difficult to make margins work with a maximum of 3 people per property. Also, does private mortgage insurance work the same on multi family units and single family homes in Colorado?



Hey @Jacob McMahon

Congrats to you for your ambition! If you are looking to connect with someone for some guidance or advice, feel free to reach out. I also recommend you read this article I wrote for Bigger Pockets titled How to Invest in Real Estate Before Turning 21. Once you've read it, let me know your thoughts and if you have any questions. I am a high school teacher in Colorado and I am always looking to help young people get started in real estate investing or help in any way I can. Let me know if you want to chat sometime.

Thanks for the advice Dan!

I think house hacking could really work with student housing here in Fort Collins. After reading your article on how to invest in real estate before turning 21, I came up with a few questions. The first being, do banks view homes and multi-family units the same way? Also I noticed in the example you used, you put down 5% on the property, and came up with a $900/month payment, does that include PMI? I am looking to get a credit card soon, hopefully one with travel benefits, but I find it overwhelming how many options there are.



Hi Jacob, sounds like you are super ready to get started! There is tons to learn before you truly gets started but  understand loans and the loan process is key to your success! Definitely reach out to a few lenders and learn everything you can about loans. The rules and regulations are always changing so be up on it at all times. If you want I have a few I can refer to you here in northern Colorado and Denver as well. 

But as an investor here in northern Colorado and Reltor Fort Collins is a very difficult market to start in. Though not impossible. Understanding what you qualify for in a mortgage will then be key to help you figure out what type of property will fit into your investment portfolio. Bigger pockets dose a great job of helping us dream big. But the fort co market and multi family type properties there right now start in the 500k range. Very high buy in for a first investment for most of us, but it is possible. 

Also if you want to learn more about our local ft co market I strongly recommend you get involved with James orrs meet up group for real Estate investing. He also has a pod cast that focuses on our local market. Then once you are ready look and interview investment savvy realtors that will walk properties with you and talk numbers with perspective. Hope this helps a bit.  

Here is a local realtor and investor that has classes on house hacking.  
James Orr, I think classes are virtual still but may be in person soon again soon.  He has good branding around this with the tag line Nomad.  Also puts many of the classes up on podcast.  

I think the low money down owner occupant loan will get you to a rental portfolio easier and faster than BRRRR but I built my portfolio BRRRing. I'm working on two BRRRR properties now in Fort Collins so while hard is possible. Probably need to look in to loan qualifications, building income and building credit. I know at least one guy that did it when I was in school.

Thanks for the timely response Blake! I am definitely going to check out James Orr's page today, but I am curious when you say a low money down owner occupant loan will get my portfolio started the fastest. My understanding is that banks require less in terms of credit for a low money down owner occupant loan than a normal house loan, is that correct? If so, I think I will be able to get into a property this year or next. It seems to me like there could be an opportunity in multi family building student housing in Fort Collins, where for the most part, the tenant's parents will be paying rent for them. In a situation like this, would I also be able to apply the rehab and refinance steps of the BRRRR process to maximize equity I can pull back out?




Owner occupant loans have many options, in Colorado you can do 1% down with a CHAFA loan, you have to make less than $55,000 or some pretty high amount but still lower income, lots of PMI and higher payment since you have so little down, I don't think they like people moving and making it a rental unless you pay off the 2nd loan for 2.5% that CHAFA makes.

FHA loans 3.5% down, most entry level buyers use this because FHA will take a lower credit score, you have PMI and higher payment.

3% down conventional, if you have good credit I think you can get 3% down conventional loan rates are higher with lower down payment, PMI for any loans over 80% LTV.

5%+ down payment conventional loan, probably best loan for Nomad, moving in living and house hacking then keeping as a rental and moving on.  

If you do a BRRRR deal many more steps, get great deal, fund deal, manage / perform construction, refi. Refi's up to 80% pricing is much better at 75% plan on that. Usually you still have to come up with 5% or 10% of the property value unless you bought really low or really improved the property with construction. I choose to do this because I don't want to move house to house but I started Real Estate after my 2nd kid and about age 34. If you're young the Nomad model is so much easier and so much more attainable and most young people move every year anyway.

Of course you could BRRRR Multi family student housing.  But that is a way bigger step up the ladder to develop and build or buy and reposition multi family.  Lookup or follow FR Development guys in Fort Collins, I think 3 late 20's CSU grads that have done several big developments and construction projects at a young age.  Definitely possible but gotta build a lotta skills and work that much harder.  

Sounds like you're a good saver.  Go meet with a mortgage broker, find out what you need to do to qualify for an owner occupant loan and an investor landlord loan.  Do those steps, build income or credit or savings or whatever's needed.  Learn more about real estate, market for a property with sweat equity methods and try to get a good deal.