All Forum Posts by: Ben Rhodin

No need to hire a lawyer for this type of transaction, that will be the most expensive approach in my opinion for what you need. You can get the standard Colorado purchase agreement, and if anything you will just need a Realtor to tell you what dates, deadlines, and contingencies are important (of course this depends on you and the tenants). Then you'll just bring in a title company (this is a necessity no matter what) to run the title and transfer portion of the transaction. If you have a realtor friend they should be able to help you out with this for lunch or something. Or another way is to bring in the realtor, to broker the deal for a reduced commission so none of you guys have to deal with any of it, and you know it will all run smoothly and efficiently. You can just tack this onto the sales price, and it will basically be baked into the loan for the buyers so no one is coming out of pocket for it (sort of). I do this all the time for clients and friends, as it makes it easier and more enjoyable for all parties involved, and has a mediator in the transaction. 

A lawyer would only help in drafting up the contract, they would not be assisting in the sales process, so you would basically pay a lawyer to help you fill out a standardized form. That is just my take on the FISBO process, you want the contact and support in case something comes up in the inspection, appraisal, HOA docs, title, financing, etc... someone working to keep the deal together, and mediate between the parties.

If this was a Flip, and you have completed the rehab, and you bought it below value then you should have some good equity created in the property. You may not have to think about "sinking" 20% into the property, if you have created ~20% equity on top of your purchase price and all associated rehab costs then you may be able to refinance and pull all your capital back out. Or at least get to that 10% down mark that you want. Basically turning your Flip into a BRRRR, which if it were to work for a flip, and your numbers were solid, it should be at least close.

Hey @Reid Sealby! Definitely get a Realtor to run you a CMA on your property to make sure you are in the right ballpark. Happy to assist here.

A lot of good info from the others above, and in short the best way to look at the two options is this... They basically produce the same result, in the way of getting you to utilize your equity. However, a HELOC will be more beneficial if you plan on using it for short-term financing, or purposes, such as a flip, or BRRRR, as you will be paying off the HELOC and then you can reuse the HELOC. A Cash-out Refinance is more suited for long-term investments or purposes, such as a straight buy and holds, as you'll have a lower predictable payment each month, and you can make sure your money is making you more than that on the investment.

Another simple way of putting it is that a HELOC is cheaper in the short term, and a Cash-out is cheaper in the long term. So I look at this choice more from a strategy perspective, than a pro and con perspective. Each one is better suited for a purpose, so my question would be how are you planning on utilizing this money?

Hey @Ramada Evans! Welcome, and excited for your first steps! 

There is no right way to go about your first investment, and it will completely depend on your own capabilities and goals. My first suggestion to any first-time investor is to invest in your backyard first, if possible. This is not to say the out-of-state investment is off the table, but there are just more moving parts, and you have to put more faith into your team. If you haven't done and been the point man/woman on an investment can be challenging and you may not know what to look for. 

It is true, here in CO most properties will not be "deals" from a straightforward perspective, but I want to disagree with Randall above. Yes, deals are not found, but there are plenty of deals to be made out here. I still have clients closing on MLS deals every day that produce tremendous cash flow. It just requires a different way of thinking than just a straight LTR. There are numerous strategies that we are using right now, including but not limited too... short term rentals, medium-term rentals, rent by the room, and making more than one rentable space in a single-family.

The easiest and most approachable way for you to get started in my opinion would be to utilize that equity in your primary (or if you have some capital saved up) and move into a new primary residence and keep your current place as a rental. Your current primary would probably make a solid rental, simply due to you owning it for numerous years. It is much more approachable as you can get into a primary for better terms and less money down than you would a rental.

If that's not an option or a desire, then I would recommend finding an Investor Friendly Agent that can guide you through whatever market you are going to go into. But I would first figure out what it is you are looking for, as Randall pointed out, having a benchmark will make locking in a purchase much easier. I am more than happy to help you find the perfect strategy for your needs and goals! Just hit me up, or me and two other agents run a monthly investor mastermind tailored towards newer investors here in Denver. 

Hey there @Ryan Johanson! Thank you for posting this question, it is one of my favorites to answer. The classic dilemma of should I keep, or should I sell. I have helped out numerous other clients with this exact same question and would be happy to run through the scenarios with you as well. 

First, for your questions, How long have you lived in that primary? If you have lived in it for 2 out of the last 5 years, you will be exempt from paying capital gains tax on the first $250,000 of profit ($500,000 if you are married). So that may take away the 1031 question entirely. If you haven't, then it is situation-based, and how much profit you think you'll make if it makes sense to do a 1031 or not.

As for the should I sell or should I keep the question, the easy answer is where will you get the highest ROI. I am always in the school of thought to keep any property, but if the question is should I keep this property or sell it and buy something else, that is another story. I am happy to run through this scenario, as it will depend on how much you could make from the sale of the property, and what you could get from that property. As well as how much cash flow you could produce from it as a rental, and if you could possibly refinance and take out enough cash to make your second purchase. It is very situational and I would need the whole picture to best guide you!

But let's just assume you would produce $500 in cash flow from your property as a rental (assuming roughly $500 in reserves). That's not too shabby and a pretty good amount. But let's say you were able to sell the property, get $200k in proceeds, and take that and purchase the STR that you wanted, which then produces $1500 in cash flow every month (probably conservative for a popular STR). Then clearly your money is going further with the STR. Or maybe you'd be able to get two properties from it, each producing $1500 (possible?). However, let's say you could do a cashout refinance on it, and still get $150k or so, that you go and buy that STR with, then maybe your primary is producing $300 in cash flow, and the new STR is producing $1500, then you come out on top, but you need to make sure your DTI can support the STR, the new primary and the cash-out refinance. I am assuming you would use a second home mortgage for the STR, so it may be very possible that you could pick up the STR, and another rental somewhere with the proceeds (I am guessing depending on how much you can get from the sale).

Of course, that was all hypothetical, but if you want to, I'll shoot you a PM and if you want to share with me all the details we can dig in and find the best course of action for you! I hope my long winded answer gave you some clarity!

Hey @Andre Galaviz! Congratulations on diving into the crazy Denver market, and yes as you may be noticing the small multifamily realm is a very tough market here in Denver right now. There is very limited inventory, and a lot of capital swooping them up real fast. I would be glad to give some advice on your search and hopefully, it helps!

First of all, I would through the 1% rule out the window here in Denver. It is more of a guideline, and at the price points here in Denver, it just simply doesn't make sense. buying an 800k duplex, that has a 2/1 on each side, you would want it to rent for $8000 a month. It's just not going to happen. 

Secondly, I didn't see it in your post, but what are your goals with this purchase? That is how I approach setting up searches and looking for properties with my clients. As a deal is going to look very different for a client that is house hacking and just wants to cover half their expenses, vs an investor trying to get $200 a door. So I would sit down and figure out a realistic goal for your investment, whether that is $100 a door, $200 a door, or whatever. That way you have a benchmark and clear criteria that you can go after. 

Thirdly, The clearer you can get with your criteria, the easier it will be for you and your Realtor. If you say I'm just looking for a deal, it's going to be a lot tougher. But if you say, I only want to buy a duplex in Wash Park that will produce $200 in cashflow a door and require at most 20k in rehab... then you'll have a much easier time finding the deal that works, and not have to sift through the junk.

Fourthly, If you are after Cashflow, personally I would look elsewhere rather than small multifamily here in Denver. Or think about creative rental strategies. If you want multiple units, you may think about going with either medium-term tenants, or if you look in cities that allow them, STR could work well also. Or restructure and find Single-family properties, that have a Mother in Law suite, or can have one added, and rent it like a multi unit. It will be very challenging to find cash-flowing properties with a simple LTR strategy here in Denver, our rent to price ratio just isn't there.

To finally answer your question, yes the rental property calculator is great for analyzing the deals. If you want, I am happy to walk you through a few analyses, or help flush out a strategy that will get you to your goals quicker! Your agent should be your best resource for this stuff, especially if they are investor-friendly and do it themselves. Let me know if there is anything else I can help with! 

Hey @Alex Turner! Welcome o the community, a great place to be and meet like-minded people! If you ever want to talk shop, I always am looking for great mortgage brokers for my clients here in Denver. As for your goals, I can totally get it, it's just like being a Realtor and not investing yourself! 

As for getting started out here, I would personally suggest something a bit more straightforward. Whether that is a househack or a traditional buy-and-hold. BRRRRs are tough to complete out here, or at least a perfect BRRRR where you can pull all your money out. This is mostly due to our price levels, and unless you can get a great off-market deal, it will be nearly impossible. But pulling most or some of your capital out isn't bad either! Or just doing a traditional rehab and creating the equity. There are plenty of great ways to create both cash flow and equity here in Denver, and I would be happy to chat about it and see what may be the best direction for you! As I tell everyone, there isn't the best way to invest in Denver, It all depends on your goals and what you have to invest in.

Currently, a strategy I am putting a lot of attention on is the medium-term rental space, as well as the split units in an SFR. But if you really want to get started and jump-start your journey, I have to throw out the obligatory "you should house hack", haha. Let me know if you ever want to chat more!

Hey @Ben Brown! You did mention this is Retail space that you are looking at. Are you looking for yourself, or thinking about investing in a retail spot in the area.

Retail is going to have a different rate than residential rental rates of course, and most of the common tools (rentometer, and the BP estimator) won't give you that info.  The best option is to contact a commercial property manager and see, as retail spaces can vary dramatically based on location, type of lease, and other factors. So there isn't a great "estimate" for what a typical space will go for. 

Hey @Jason Hawkins! Welcome to the posting world! 

What's your rational behind wanting to pay cash for the property? With your experience in the construction world and the capital that you have lined up you could be well set on investing here in Denver. Especially if you aren't afraid of rehabbing and can do a partial BRRRR and be able to pull out a good chunk of your invested capital. Even in a cheaper market, why are you looking to pay cash for the property? You could stretch your capital much further by leveraging that capital.

Personally, to mitigate risks and make it more approachable I always recommend starting out and going deep in your neighborhood market. At least you are there and are able to watch over your investment if something goes wrong, and help manage all the projects. Out of state or long distance definitely introduces more variables that increase the risk.

If you are set on going out of state, I would push you to just pick one. In the end it is more important to make a decision than it is to make the "right" decision. I was in the same boat, and spent 3 months researching different markets around the states, and everyone of them worked and had a pro and a con. Eventually I just told myself to pick one, and I choose the one that I felt most confident with the team I had, and within a month was closed on a cash flowing property. If you have Boots on the ground somewhere that can/want to help you, then I would go there. Always easier to begin with someone you trust!

Hope that helps, and if you want to explore the Denver market again just hit me up!

Hey @Gabriel Gomez! That's a solid portfolio, and would love to hear more about the ones in Mexico City!

As Clara mentioned above, navigating the STR regulations here in Denver can be complicated and change quite a bit. Clara was pretty spot on with her answer but there are further regulations to know about.

Currently, Yes, Arvada and Wheatridge are the two STR friendly cities in the Metro area for investment properties. However, Wheatridge only allows an owner to maintain two licenses at a time, one for a full property, and one for a partial property (Renting an ADU, or a basement unit while owner occupying for example). Arvada allows 3 rental licenses for an owner at a time, no regulations on what type, except that you can only have one booking at a time for a property. So you can't rent out two units in a single home.

Westminster currently doesn't have regulations, so it's up in the air as to where they are heading. Unincorporated Adam's County (where Clara said) is planning on legalizing STRs with very minimal regulations. Centennial just south of Denver is also planning on legalizing them, with some regulations, but you have to navigate their HOAs.

The other option, if you are already in Vail, is heading into the foothills of the Denver Metro area. Areas like Conifer, Evergreen, etc. do very well as getaway rentals. There are still a few regulations up there that need to be navigated, but they are pretty easy!

Let me know if you want to chat some more! Happy to help out in anyway!