House hacking in Denver and what areas to target

[Jacob Munson]

Me and my girlfriend (probably wife by that point) are planning a move to Denver most likely in early 2025 and are interested in house hacking as a means to save income and build a rental portfolio. I'd like to have some sort of target down payment/price to have in mind while we save $$$. Our combined income would be about 200k if that helps (obviously who knows where interest rates will be by then as well). I guess a handful of questions for those that know the area:

- What are areas that would be attractive for 20 somethings like us to live that could also make sense numbers wise.

- Are there a lot of duplexes typically for sale or are most people house hacking with ADU's, basements, other strategies.

- What would be the ideal loan type? Is an FHA best in this type of situation?

- Coming from Southern CA I'm no stranger to high prices but how does Denver compare?

Thanks in advance!

[Brandon Stock]

Hey Jacob, I just sent you a message. Feel free to reach out anytime. 

[Ben Einspahr]

@Jacob Munson love the planning ahead! To answer your questions:

- Majority of our clients do not purchase in Denver County. Regulations are PIA and prices are much higher. 90% of our clients purchase in Lakewood, Wheat Ridge, Arvada, Westminster, and Aurora. Excellent price to rent ratio.

-Yes there are duplex's out there but can take a good chunk of money to get rent ready. Plus you have to battle with all the other investors targeting duplex's. 2 popular strategies here are buying 4+ bedroom and renting out the room. Assuming you will have a wife by then, she will not be down for that:) Your other option is buying single family home with some form of separate income suite to rent out. Works excellent.

- Regarding loans. Keep it simple. 90% do 30 year fix conventional or FHA. The other 10% do a popular grant program that offers downpayment assistance. When it comes to lending, keep it simple. No need to get creative.

- In the Denver Metro Market you can find anything between 500k - 600k after you get above that, it can get difficult to cashflow after moving out. Moving out #'s are much more important than while living there.

We just wrapped up a 6 part series analyzing house hacks in Denver. Ill DM you the details

Best of luck!

[Chris Davidson]

@Jacob Munson way to plan ahead! It sounds like you are going to be on the right path. Save as much as you can as having more funds will give you more flexibility. Prices will change, but with the long lead time you have really start tracking the area and see which parts are trending the direction you want and will have the properties you are looking for. 

Don't worry about loan type right now you are two years out just get funds built up. If you are going 2 or less units I would avoid FHA incase you want to use it for a quad later you wouldn't have to refi it. With 200k salary and two years to build up your funds you should be in a good spot and be able to float a owner occupied conventional.

Keep crushing it!

[Tanner Pile]

@Jacob Munson

Have you had any thought about what type of tenant you will want to rent to?

House hacking a SFH can work with a spouse but for most the spouse typically does not want roommates. Understandable! I don't even want roommates as a single guy hahah. Finding a house and cottage type property will work well for having your own space. Cottages (ADU) can be great for mid term or short term rentals (STRs) too! They are a lot more work than long term rentals so you'll have to be up for the challenge but will bring a lot more rental income if done correctly. Your spouse could possibly be more on board if she gets to design it too!

May - August are the prime time months for short term rentals (Airbnb) in Denver and Colorado Springs. We are too far away from the mountains to get the winter ski season increase in rental bookings. Mountain town STRs are great for that in the winter though!

[Lawrence Potts]

Quote from @Jacob Munson:

Me and my girlfriend (probably wife by that point) are planning a move to Denver most likely in early 2025 and are interested in house hacking as a means to save income and build a rental portfolio. I'd like to have some sort of target down payment/price to have in mind while we save $$$. Our combined income would be about 200k if that helps (obviously who knows where interest rates will be by then as well). I guess a handful of questions for those that know the area:

- What are areas that would be attractive for 20 somethings like us to live that could also make sense numbers wise.

- Are there a lot of duplexes typically for sale or are most people house hacking with ADU's, basements, other strategies.

- What would be the ideal loan type? Is an FHA best in this type of situation?

- Coming from Southern CA I'm no stranger to high prices but how does Denver compare?

Thanks in advance!

Get a hold of @Ryan Thomson! He's an expert house hacker in Colorado Springs but he may be able to get you connected in the Denver area.

You'll have to go FHA for multifamily unless you want to go 15% down with a conventional mortgage.

[Nazanin Boojar]

Denver's doing really good in short-term rentals. The average net cap rate, as I have analyzed, is around 10.47% annually.

You can get a single-family house, rent it out and rent your own home. If you locate the right area and property, it will pay off the mortgage payments.

You don't even have to be around the house, there are lots of property managers that can handle all the tasks so you can count on it as a passive income (around 10% net income). You'll be able to do what you love doing, living where you and your partner really want.

You can also refinance later and get more properties over time. 

[Ryan Thomson]

@Jacob Munson nice! I love a good house hack. I'd connect with @Kayla Givens out in Denver. She is a fantastic House Hacking agent and investor herself in the Denver Area.

[Kayla Givens]

@Jacob Munson so exciting that you're looking to get started with house hacking! Thanks for the tag @Ryan Thomson!! Jacob - I'll send you a direct message. Would love to hop on the phone and chat more with you about your goals in the Denver area!

[Ben Rhodin]

Hey @Jacob Munson! Way to plan ahead, and there is already a ton of great info in here for you to sift through. But I'll add a few points. 

The loan product will depend on the asset type you are targeting. Conventional for Single families, and FHA for any multifamilies (at least at this time). Just be aware that anything larger than a duplex will get complicated due to the FHAs self-sufficiency test, which makes it nearly impossible to get a tri-quadplex here in Denver.

I agree look in surrounding cities, and not in Denver proper, unless you are ok with some extra regulations and plan to be strictly above board for your investing strategy. Location will also depend on what strategy you plan to utilize as you'll have to navigate Short term rental laws around the metro area, and who knows where those will be in 2025.

Prices right now are a sweet spot of 500-600k for single families and 650k+ for multifamilies. Multifamilies can easily get into the millions.

One thing I haven't seen you think about, or anyone else mention, since you are two years out from moving out here, what is keeping you from house hacking in San Diego for the time being? Even if you just bought something for you both to live in for the next 2ish years, that would work as an investment out there when you move, that could help jumpstart your investing career in a pretty great location.

[Jacob Munson]

Hey @Ben Rhodin what is a self sufficency test? And also I do own my condo here in San Diego and posted previously about my strategy to ideally hang onto it and have enough capital to afford a house hack in the future as well. I wrote about it here https://www.biggerpockets.com/...

Pretty sure I can build up enough of a down payment to afford 700-800k around Denver without needing to touch the equity in the condo and hopefully as rents continue to increase can cash flow a few hundred bucks a month early on.

[Ben Rhodin]

Quote from @Jacob Munson:

Hey @Ben Rhodin what is a self sufficency test? And also I do own my condo here in San Diego and posted previously about my strategy to ideally hang onto it and have enough capital to afford a house hack in the future as well. I wrote about it here https://www.biggerpockets.com/...

Pretty sure I can build up enough of a down payment to afford 700-800k around Denver without needing to touch the equity in the condo and hopefully as rents continue to increase can cash flow a few hundred bucks a month early on.

Oh yea, I remember that post and I believe we chatted about it. The self-sufficiency test is an approval standard for FHA loans on 3-4 unit properties. Basically, 75% of the appraised rents for all of the units have to cover your entire PITI otherwise the FHA won't approve the loan. and coming from California as Im sure you are aware having anything cashflow with our price-to-rent ratios on long terms makes this a real challenge.

[Bart Van Leijsen]

Quote from @Ben Einspahr:

@Jacob Munson love the planning ahead! To answer your questions:

- Majority of our clients do not purchase in Denver County. Regulations are PIA and prices are much higher. 90% of our clients purchase in Lakewood, Wheat Ridge, Arvada, Westminster, and Aurora. Excellent price to rent ratio.

-Yes there are duplex's out there but can take a good chunk of money to get rent ready. Plus you have to battle with all the other investors targeting duplex's. 2 popular strategies here are buying 4+ bedroom and renting out the room. Assuming you will have a wife by then, she will not be down for that:) Your other option is buying single family home with some form of separate income suite to rent out. Works excellent.

- Regarding loans. Keep it simple. 90% do 30 year fix conventional or FHA. The other 10% do a popular grant program that offers downpayment assistance. When it comes to lending, keep it simple. No need to get creative.

- In the Denver Metro Market you can find anything between 500k - 600k after you get above that, it can get difficult to cashflow after moving out. Moving out #'s are much more important than while living there.

We just wrapped up a 6 part series analyzing house hacks in Denver. Ill DM you the details

Best of luck!

 Thanks for this information Ben! Do you mind sharing the series with me?

[Ryan Thomson]

How's the hunt going in Denver @Jacob Munson. Have you visited Colorado Springs yet? It's way cooler :)  and closer to the mountains.

[Paul V.]

@Jacob Munson Glad to have you join the community in Denver.  Pretty exciting times with the Nuggets winning it all last night.  @Ryan Thomson - I can't remember, is it the Colorado Springs Nuggets? nah - I didn't think so JKJK!

Are you looking for a city environment or a suburban one? 

We own properties in Lowry, 5 Points and Cheesman/Congress Park.  Happy to answer any additional questions that you might have.  

[Ryan Thomson]

@Paul V. hahah Go nuggets! 

[Erica Murphy]

My husband and I bought a property in the Platt Park neighborhood two years ago. We paid $800k for it. It's a house with full basement and a detached ADU. The previous owner converted the basement to an apartment with separate entrance, so we have three units with three house numbers. When we bought it, it needed: A/C in all units, soundproofing between the upstairs and basement units, all new plumbing in the ADU, tree removal, backflow preventer for the sewer, and new sidewalks and driveway poured. It was a lot to take on, but we're glad we did it. We live in the basement, rent the upstairs as a furnished MTR, and rent the ADU as an Airbnb. Things have gone well for us. We love living in the area. We came from Brooklyn and Platt Park is very walkable which was important to us.