HELP! Duplex in Louisville Colorado
Howdy BP –
I have a duplex under contract In Louisville CO and would love all the advice I can get. I am planning to live in one side and "house hack" the first 1-2 years. This deal was found off MLS and negotiated through seller's agent. (Questions at bottom)
The property:
- Price: $326,000
- Duplex: (2br/1ba)/(3br/1ba)
- I will occupy the 3br unit the 1st year (Since the lease is mo-mo), and the 2br unit the 2nd year
- Current Rents: 2br: $950; 3br $1,100; TOTAL= $2050/mo
- Projected Rents: 2br: $1000; 3br $1,300; TOTAL= $2300/mo
- Needs $15,000 of work. Seller to pay $5,800 leaving me $9,200
- Flood Zone AE: Total Insurance Premium w/ Hazard=$3,201/year
- Flood insurance will likely increase ~18% per year
- As of this fall, the city of Louisville is completing a drainage project to remove this property from the flood zone. Within 2 years, the property will be lifted out of the flood zone.
- Built: 1908
- ~2,000sf duplex w/ miners shed. Lot is ~7,000sf
- Ranch w/ Basement: All bedrooms are in basement
- Full 403k $45,000 remodel in 2010
- On corner of neighborhood st and two lane highway.
- City is undergoing a large project to beautify and slow traffic on the highway. The house will end up in a cul-de-sac
- 2 blocks from downtown Main Street
- Neighborhood is going through urban renewal. Large mixed use development project to expand old-town area (See plans below)
Louisville:
- Louisville is in Boulder County (without Boulder landlord/tenant laws) and is one of the hottest markets in Northern Colorado. It has been voted “America’s favorite small town” by Money magazine for several years now. Real estate values have continued to climb, even through 2008-2009
Financials:
- Performed Craigslist/comp rent study and was getting 6-10 craigslist responses per day when raising rents to $1,300 (2br) and $1,500 (3br)
- 2br is currently locked into annual lease at $950
- I intend to occupy the 3br side of duplex for year 1, move to the 2br side for year 2, and hope the property is self-sustaining (w/ property management) by year 3.
- I currently pay $1,600 in rent in Boulder CO
Questions:
- Clearly this is more of an appreciation play from an investment perspective; am I saddling too much risk?
- Will the property management experience, equity buildup, tax benefits, etc. make this worth it even if the property does not appreciate?
- Given that this is by far the best house hacking deal is my neck of the woods, would I be better off buying a duplex/fourplex a few hours away that meets the 1% rule? It seems that the areas where 1% is possible in CO have been more volatile over time, and are not secure growth-stage markets. Is Boulder County a safer bet, and is a safer bet the best course of action when buying my first property?
- Advice?
Thank you all in advance!
Jeff