Help Analyze Denver Duplex for Cash Flow/House Hack Potential

14 Replies

Hello all, I live in the Denver area and am interested in living for free through a house hack. I found a property on Zillow in the Westwood area (which I believe will be a high appreciation area). It is already in turnkey condition, however, could still be updated a bit to force appreciation eventually. It is a 2 BR, 1 Bath duplex going for $262,500 but there is the option to buy the other side of the duplex and have both units for $510,000. If I put 3.5% down, I would be paying $3235 a month for both units. Zillow estimates that each unit would rent for $1800 a month. However, this seems high to me? How can I be better sure of what kind of rent I could expect out of the unit and does this sound like a deal that would be good to invest in? I'm 100% new to this and don't know what to look out for. Any resources/guidance appreciated! Thank you. Ideally I would like to only live in the unit for a year myself and then use the money from renting both units to pay for a home in the Highlands Ranch area for myself or invest back into out of state turnkeys that cash flow. If I rented out both sides of this property at $1800, I would be cash flowing about $365 a month. If I lived in one unit and rented out the other, then I would have a mortgage payment of $1435 which also seems high to me for 717 square feet of space. What am I missing? Thanks! The address is 2841 W 3rd Ave, Denver, CO 80219 listed here: https://www.zillow.com/homedet...

Hi, don't trust Zillow for rent estimate. It's a decent way to get general numbers, but BP Insights has a great rent estimator that is accurate. And, check out Rentometer.  These tools are accurate and give you the low to high rents in the area.  Also, call Property Managers and talk with your realtor (if you have one) to get a clear picture on rent. 

I'd say it is a good deal if you rent out the 2/1 and find a compatible roommate to share the 2/1 that you will occupy. This will really offset your costs and maximize your wealth. You could also search for a MFR that has a studio detached from a separate dwelling, allowing you to live by yourself and maximize offsetting the expenses by renting out the bigger units.

Hi there.  The department of HUD also has a website listing its analysis of market rents on every city and town in the U.S. It seems to be within $100 dollars high/low in my area (Burlington, VT).  I also do a review of current listings on Realtor.com and Craigslist for a more complete picture.  At first glance yours doesn't look like a great deal.  In my are you can expect the tenant's rent to cover your entire mortgage if you are house hacking.  Look at LOTS of properties and you'll get a better sense of what is and what is NOT a good deal in your area.

=)

@Katie Hoffman I had a very similar strategy and purchased a duplex in Westwood in February. I am currently living in one side and renting the other side. Each unit is 2 beds & 1 bath I am renting for $1,650/mo. I was already able to refinance and bring down my monthly expenses. If I rent out both sides as I plan on doing eventually... I anticipate about a $700/mo cash flow.

@Katie Hoffman

For me the best way to figure out how much you can expect in rent is to look at how much people are actually charging. Go to places where landlords advertise contracts like Craigslist, Facebook Marketplace, Trulia, or Hotpads. Also, Realtor.com has a cool Rental app that lists rentals available. Look up your area and see what similar places are renting for just to give yourself an estimate of what you can expect to charge.

Hi Katie, 


I ran those numbers through a personal calculator with the following assumptions:

5% Cap ex

5% Repairs

10% Property Management

$75/month for lawn/snow


Also, this does not include any owner-paid utilities or HOA fees.



All that being said, I see a negative cashflow of $386/month. Are you familiar with any of the calculators here on BP? I would recommend checking them out to help analyze some properties. If you have any questions feel free to reach out. 


Best.

Thanks Brady for that breakdown! It is helpful to see it is charts/graphs like that, and I certainly don’t want negative cash flow. At your suggestion I did find the BP calculators and that is SO helpful! Thanks again for the reply. 

@Katie Hoffman Congrats on looking to house hack in Denver, that's a great idea to achieve your goal of purchasing a house in Highlands Ranch or out of state rentals long-term. 

I know that area of town very well since I have a couple of properties over there, and I'm getting 1,500 for 2/1s that are updated similarly to those without granite countertops. The big issue I see with aiming for 1,800 for that place is that it is a multifamily property: shared walls, no garage, location (close to Federal), no A/C?, and a really small two bedroom place - 717 sqft means tiny bedrooms. 

Thus, because the size of the units and timing (November and December are not the easiest months to find tenants), you are looking at 1,550-1,650 rents per unit most likely. 

Also, the best way to determine rent prices is to get onto Zillow, trulia, hotpads, facebook marketplace, and craigslist. Look for properties nearby and see what your competition is offering their 2/1s units for. Since it is a duplex, you have to look at apartments, townhomes, condos and other multifamilies since those are your comps, not houses that are 2/1s.  Look at other 2/1s that have similar square footage and updates. 

Looking at the listing, it appears it was rented for 1,395 back in May 2018, so that's not a bad baseline. Since it was recently flipped and has nicer features with market/rent appreciation, you will get more than that, but probably not 1,800.

Also, if the property was split since they are selling each half, you would have to combine them into one legal description to purchase as a duplex since right now, they are selling each side individually and you would need two loans to purchase. 

Thank you Jeff for your detailed reply! It’s good to hear input from someone who is successful doing what I want to do and hear your actual rental price for similar 2/1 in the area. I appreciate the idea of looking at apartments and townhouses as comps (didn’t know to do that) and also of getting lender input first. I didn’t realize that I may need two loans to purchase! Thanks again!