All Forum Posts by: Ben Rhodin

Hi @Landon Miller! This is a very common question, but you have definitely thought about it more than most. The first question that I would ask is have you already spoken to an investor-minded lender? This is important as it might cut your options pretty quickly if they deem you won't be able to maintain both mortgages. Getting a clear idea of what your lending situation would be is important. I had a similar situation with a client that was moving to their second house hack, but because of what he was bringing in on his current one it cut his preapproval on his next purchase from 600k to 400k roughly. Which made his decision to sell easy, as he wouldn't have been able to get into the house hack he wanted with keeping his current place. 

I would also look into different rental strategies for your current place. I am guessing that your rent assumptions are with a long-term tenant? As well as what is the reason for needing a PM? Have you thought about managing yourself, to begin with?

Without knowing the exact location or condition of the property I can't provide exact advice, but Id looks into other rental forms such as either Medium-term furnished rentals, or rent by the room to increase the rental income. This might bring it from a break-even investment to a nice cash-flowing property. 

I would also take all the repairs and updates that you are planning on completing and prioritize them. If the AC/Furnace is still operational, maybe just get them serviced and leave them be. Same with the sewer and roof (given it's a 640 Sqft the roof shouldn't be that astronomical of an expense), I understand what you are wanting to do, but there is no need to repair/replace unless it is an immediate concern. If these major systems can last another 5 years without causing any issues (or at least major issues) then you can plan and budget for them (would be about 300$ a month). I'm going to assume (could be wrong) that a lot of the things you are looking to do are from the standpoint of a homeowner living there, and not from a rental standpoint.

In the end, however, I would just plug the numbers, and see where your investment would get you the best returns. If selling it and getting a new primary (that maybe you house hack?) and are able to purchase another investment property that cashflows you better then it might be worth it. But if you don't think you could get better returns elsewhere, then it's not worth selling it. That's how I approach the selling debacle with all my clients!

HI @Jonathan Beemer! I'm going to second Dave above. Always look for the cash flow, or at least that the investment is viable from Day 1. Don't base an investment on speculation about appreciation. I'm a bit partial to the Denver market, and I have helped many investors find success here, you just need to be creative. While you may not be able to just buy an SFR and have it cashflow you a few hundred each month, if you can take that same SFR and make two rentable units out of it, you can be sitting on $500+ cashflow each month. Then you can couple those returns with a nice appreciation rate. There are other strategies that work well out here as well, and just like anywhere you invest, you just need to understand what works, and where to go and almost any market can be viable for investing.

Hi @Frederick Wofford jr! I would mirror what @Tara Rose Iguidbashian said above. The city of Denver only allows STR in primary residences, and also they need to be licensed and permitted. You will want to keep an eye on most cities around Colorado as a lot of them have similar or pretty strict regulations. Boulder also requires licensing and permits for STR, and if it is run as a Vacation rental (rented for more than 60 days out of the year) it can be pretty tough! Estes Park has similar licensing laws and they will be property specific if they can be obtained or not, Colorado Springs is zoning specific as well.

However, if Denver is the market that you want to be in I would look into some of the surrounding cities, primarily Arvada, and Wheat Ridge are a good bet, both of these allow STR as investment properties (and Arvada doesn't require licensing). Littleton currently allows them as well, but they are in the process of possibly reversing that decision. I know a lot of clients and teammates that do well in these areas with STRs. You will get a lot of mixed visitors, from business travel to relocating, to tourists.

Happy to help out any other way! Otherwise good luck!

Hi @Ashley Wolkomir! Welcome aboard and seems like you are already in the right mindset to start killing it! If your mom is up for it I would definitely try and work out a seller-financed deal. It will give you a lot more flexibility, stay off all the books (Unless your mom wants a lien on the property) and most likely give you the best rates. As well as if it stays off the books, you could then look into getting a HELOC down the road much more quickly, since the property is technically owned free and clear. Otherwise, I know some really solid DSCR lenders here in Colorado that have pretty nice rates currently. and since you have a track record of how the property performs you should have an easy time getting a loan on it.

I know the pains and struggles of the self-employed game, and I haven't used traditional financing for any of my properties, as I still haven't hit that 2-year mark. So I am happy to give you any advice I can! As for the tax question, I would get set up with a real estate-focused CPA ASAP and go through everything with them. They will be able to guide you properly in order to have the best shot of getting you where you want to be. Happy to introduce you to mine, she is a rockstar here in Denver as well.

Otherwise GOOOD LUCK, and I'm happy to chat more if you wish!

HI @Jay Gil! I would be more than happy to give some insight into the Denver Market. My first question would be what your goal is with this investment? I wouldn't bank on appreciation to be the motivation for investment. While the Denver area sees roughly 6% appreciation YOY, it's not guaranteed. I would say the areas you identified are strong performers, but definitely in the "already developed" category. If appreciation is truly your goal, then I would look into smaller pockets (Parts of Aurora, Athmar Park, Barnum, Ruby hill to name a few) that are currently being built up, and see more chance of great appreciation over the coming years. But that is still speculation.

The other thing that you'll probably start to find when you run the numbers (even more now due to the crazy year we had) is that traditional SFR rentals are not going to be cash flowing here in Denver, especially with a PM in place. The Denver market is a strong appreciation market, but if you want to see the cash flow as well you will need to get creative with your rental strategy. One of my personal favorites is the SFR turned into multiunit, whether through an ADU, or a mother-in-law suite in the basement. These work very well and aren't that much more work than a traditional SFR. They will typically be able to cash flow you over $500 after expenses and reserves. Other strategies that work well are STR (but have to be careful with regulations), medium-term furnished rentals, or rent by room. These all work here in the Denver Metro and will adjust what kind of property you will look for.

It's not too late to invest here in Denver, you just need to understand what kind of market you are playing in. Denver is not running out of steam, and Colorado, in general, keeps pulling people in. But like most investors, appreciation isn't really an investment strategy, you want to make sure the investment works from day 1, and if it appreciates then it's the cherry on top. 

Hi @Frank Basile! @Jeff White did a killer job describing all the different routes you can take in order to house hack out here, so I won't try to reiterate those points too much! 

The way you phrased it, it seems that you are comfortable covering $2000/mo without any rental income taken into account. Was I reading that correctly? You will not find a shortage of areas in the Denver metro area where you have easy access to the mountains and ski country. Pretty much anywhere on the West side of Denver will be doable. However, before you get bogged down with all the opportunities and options you just received as far as how you can house hack, you need to figure out your criteria, and your level of comfort. If you are ok covering some of your own mortgage and would rather live comfortably with your own space, then the basement apartment is a great way. If you choose to occupy the basement unit, you can typically cover between 70-90% of your mortgage. But if you are ok sharing a space, and want to live for free and cashflow some then rent-by-the-room is the most popular way. But also finding properties that can be utilized in multiple ways gives you the chance to change it up if you ever wanted. 

I'd say most of my clients do rent-by-the-room while they live there, and when they move out they finish up the basement apartment and rent it as two units to make it easier on themselves.

Hey @Warren Mitchell! There is no shortage of research tools to get an idea of potential STR revenue. The biggest one being AirDNA. Biggerpockets also has one, that is much more simplistic. You just input your address and it spits out a revenue.

The Denver market is a good place for STR and I know a lot of clients, and friends that are killing it. You just need to know where you can have them and be careful with regulations. A lot of cities and towns (even mountain resort towns) are cracking down on STR and regulating them to the point of not being allowed.

In most of the Denver Metro Area, STRs are limited to owner-occupied properties, and a lot of areas require them to be licensed and permitted as well. Currently, the safe areas are Arvada and Wheat ridge which both allows them on investment properties and have few regulations. I am currently setting up an STR in my primary house hack in Arvada. Littleton used to be on this list as well, but they are in the process of reversing their regulations and limiting STRs again.

Westminster is able to work as well, as they do not currently have any measures allowing or limiting STRs. But this presents the risk that they could go either way in the future and your STR could become illegal. Now if you are in a position where you could House Hack a new primary here in the Denver Metro, and find a place that has a legal ADU you could place yourself almost anywhere and rent the ADU as an STR. Then you could also get another STR somewhere else, as you could utilize a low down payment loan on the primary.

Denver is a great area to invest, and I always prefer investing in your backyard! Don't hesitate to reach out if you have any other questions!

Hey @Joshua Wuehler! Welcome to the forums and seems that you are on the right track with where you are heading. The most important thing to focus on in Greeley and most of the NoCo region is zoning regulations. NoCo has some confusing zoning and occupancy limits and you need to be more focused on a closer level. You are going to be limited to being in an R-H zoned property, in order to be able to house hack by the room effectively. Any other zone will not allow you to fill the rooms to the capability that you would like, as Greeley basically follows Fort Collins U+2 rule. 

Greeley is a solid choice and I have some friends and clients that invest/house hack up there. Just like any growing region you need to be aware and more careful with tenant screening and locations. I've had a friend have some close calls regarding tenants.

Feel free to reach out! I am happy to help out any way I can. 

Hey @Hunter Nelson! You are correct in your thinking, but I would challenge you to figure out what your goals are exactly. I find that a lot of clients have this line of thought, but don't truly know where they are wanting to head. The BRRRR strategy is one of those holy grails and buzz words in the investment community, and so it's a hot topic that everyone wants to do! Because it sounds so easy and so magical haha. The first part that they don't tell you is that it's much better suited for lower-priced areas, like the midwest. As it is much easier to add 20% value onto a 100k home than it is on a 400k home. So typically BRRRRs and flips are tough in the Denver market because the margins are so thin, and any renovations you do to the home you will typically get a 1:1 return on it. So unless you can get an off-market deal, and well below market value, it is very tough to make the numbers pan out. But then again a partial BRRRR is still better than a no BRRRR, but you also have downsides, from lower cash flow to an increased holding period where you will be fronting the holding costs and the renovation costs.

Have you considered house hacking? It is honestly the best way to get started and feel the effects of REI immediately. This is where I say that people haven't thought about their goals.

Say in November of 2022 you are able to purchase a 400k home with a 12k downpayment. You spend the next 6 months rehabbing with the remaining 60k and have paid 12k in mortgage over that period. You are all in at 82k, and go to refinance.  You are going to need that home to appraise at over 600k in order to pull all your invested cash out of it, and you will also need to qualify for the new loan amount and payment. Where will you be after that? Will you rent it, or house hack it? and now you will need to be able to rent it in order to cover that increased mortgage payment.

Let's just say instead, you already have say 20-30k saved up right now, or are able to save it up pretty quickly, and instead, in November of 2021 you go out and you purchase a 5 bedroom home here in Denver for 500k with an owner-occupied low DP loan(30k all in with closing costs and DP) you then right away add a 6th bedroom in the basement and rent each of the 5 additional bedrooms for 700$ a piece. On your roughly $2400 PITI, you are bringing in $3500 a month in rental income. So you are able to live for free and bring in ~$1000 a month. Now for the next year you save up that other 30k and in November of 2022 you do the same thing and buy another house and rent your room in the old one. In this new house, you decide you want to have your own space so you decide to find a place with a mother-in-law suite in the basement. You take the MIL and you rent out the upstairs 3/1 unit for 2000 a month. So you are now paying ~$400 on your mortgage, but your other rental is bringing you in $1700 a month, so you are still living for free and making ~$1300 a month in positive cash flow. Then in 2023, you do the same thing again, and rent out the basement unit, now all together you are bringing in ~$2300 a month and living for free.

So, in roughly the same time it would take you to get that first BRRRR property done, and hopefully be cash flowing a few hundred a months, you could have 3 cash flowing properties and living for free at the same time! Just some food for thought, but I typically find that clients get hung up on all the shiny objects in REI, and to be honest there isn't a better return on investment than house hacking! And think about what you could do with the savings from living for free as well, that is something a lot of people don't take into account. In that 3 year period maybe you also invest out of state and pick up a few properties in different areas with your cashflow savings, or rent savings.

Hope that helps and sorry for the rant! Good Luck!

Hi @Trevor Murphy! Kayla nailed it with her info above. One of the biggest issues if you start trying to get your SFH permitted and rezoned as a duplex you get into building and zoning laws. This will be determined by the city if your lot would even be allowed to be zoned as a duplex or not. It will also require much more work than just making two livable spaces. Mainly fire barriers, and extra insulation in between the floors. you could go with permits for the work that is being done if you want to avoid any concerns, but as far as the city will be concerned your home is just a single family that has a Mother-in-Law suite, and you are renting the spaces separately.

This route just doesn't allow you to split the utilities, and you have to conform to occupancy limits for the whole house, instead of the units individually. But typically I have at least found that it's not worth it to try and get rezoned as multifamily.