All Forum Posts by: James Carlson

@Devin Lutz

We work in Denver and Colorado Springs. Here in Colorado, the contract to buy and sell says specifically that during the inspection period, the buyer can pull out if anything during the inspection is unsatisfactory "in Buyer’s sole subjective discretion." I imagine Idaho has something similar. That gives you broad discretion to not like the property. 

We had some house hacking buyers in Denver who were looking to buy someone else's current house hack. The tenants had all just resigned and were in for another year. My clients didn't like the level of cleanliness and worried about spending the next year in close quarters with these people. They pulled out over that. You should be good to go, but I would reach out to an Idaho agent to confirm that. 

@Jessica O.

Congrats on getting the space under contract! I know what property you're talking about. Not many better places to be in Colorado Springs that Old Colorado City. You've got all the shops, bars and restaurants there, easy access back into downtown and super close to that grocery store. 

There's a lot in your note, so a lot to unpack:

• Even at $1,200/mo rent, which sounds about right, I'm seeing slightly lower cash flow when I ran it through the calculator, but not nothing crazy. Just be aware that you might not be able to get that right away. (When do the current leases end?)
• What kind of problems is the listing agent/sellers giving you? Are you in the middle of the inspection process? Are they not willing to do any of the work? Did you happen to use an FHA loan? If so, those items you mentioned are almost certainly going to be flagged by the appraiser as conditions of funding. Heck, I've had conventional loan appraisals flag safety problems like that. So either way, the seller might have to deal with them.
• I'd call the planning department TODAY. Ask for the planner of the day. You might have to leave a message, but they're pretty good at getting back to you. Looks like you have that R4 zoning so you've crossed the first hurdle to getting a fourth unit in the garage, but definitely reach out because you never know what other kinds of requirements they have -- setbacks, bulk plane limitations, etc. 
• Are you house hacking by any chance? If so, I believe Colorado Springs' new Airbnb law allows for you to short-term rent in another unit as long as one of them is your primary residence. That can juice your returns.
• Whether this is a good deal or not depends on your goals. Are you in this for immediate cash flow? Is appreciation a factor? Are you house hacking Long-term I love so much in Colorado Springs, and especially in Old Colorado City. If you can break even cash-flow wise for now, with the idea of getting a fourth unit up and running, I love getting into a multi-unit.
  • Not sure if this helps or not, but we bought a duplex (technically a house + carriage house on an R2 lot) in 2018 with some partners for $470,000 and just recently listed it for sale. It went under contract in 1 day for significantly over asking. Both units were updated a lot and there was a 3-car garage, but it's also just a 2-unit and was about a mile east of downtown, so not as desirable as OCC. 

Good luck!

@Sergey Grunt

We just refinanced our 1br condo in Cap Hill in Denver, as well, along with another of our Colorado Springs properties. It's nice to see those savings every month. 

I'm not a lender, but the two lenders I work with often said what it's tough to do. I wouldn't want to do a business loan, because the rates are worse, and that defeats the whole purpose of refinancing. One option would be to quit claim it out of your LLC's name, into your name, refinance under your name and then quit claim back into the LLC's name after you close.

As always, the best resource is going to be your lender. Ask them what your options are. If they don't have answers, find another lender. Good luck!

@Emmanuel Sesay

Congrats on the purchase! That's awesome. Our first purchase was a little 1br condo in Denver. Now we have five properties between Denver and Colorado Springs. 

Big upfront disclaimer: I'm not a lawyer, and this isn't legal advice. That said, there seem to be two answers to your question: 1. The letter of the law. 2. The practical, on-the-ground reality.

You signed mortgage documents that say you intend to live in the property for a year. If you did not intend to do so and you move out, they can accuse you of mortgage fraud. That "intend" is a very interesting term, though, so if you really did have circumstances change, then you might be okay. 

We see this sometimes when people try to buy a house with a primary residence loan too soon after buying a different property with a primary loan. Fannie and Freddie can flag that and say something fishy is going on and we won't give you a new primary loan.

In practice, though, as @Zach Westerfield said, banks aren't normally in the business of questioning loans that are being paid on time. 

Good luck at school!

Great question. In hot markets like here in Denver and Colorado Springs, I think a good agent can make the difference. (But of course I'd say that in my position.) Here's what I tell our homebuyers' class.

Communication. 
Buying a house is stressful and likely a process you know little about. Having an agent who communicates with you can help reduce that stress. And by communication, I mean two things: 

1. Frequency. They should get back to you quickly. Even if there's no update, they should communicate to you that there's no update yet but they'll touch base when there is. Not hearing from an agent about what's going on with this complicated process is inexcusable. 

2. Clarity. Some agents can distill complicated concepts into digestible chunks. Some can't. After talking with your agent, do you understand the process? Or are you still foggy?

You can't ask them if they're a good communicator, you just have to watch for it. Your initial conversations and interviews are a great testing ground for their communication skills. They're on their best behavior during this time, and if they're still not getting back to you and clearly articulating how things work right now, they'll never do it better.

Experience
This is probably equally as important as communication. I'm not sure what the threshold is, but somewhere around 20 deals/year sounds right. I remember reading a stat a few years ago that there were roughly 20,000 agents in the Denver metro area but that 15% of those did something like 85% of the deals. You don't want that part-time agent. There's big money to be won and lost here. You want someone who knows all the tools to both get you under contract and get you the best deals -- during the initial offer and during inspection. 

Ask them how many deals they did last year. What kind of deals. (If you're investing, you want an agent who invests themselves and has worked with investors.) And how many years they've been doing this.

Negotiating skills
This is a piggy-back off the above. Again, there's a lot of money at stake. I've dealt with agents that obviously didn't know what they were doing and we got a lot more for our clients than we probably should have. And I've dealt with strong negotiators where it's a battle. You want the battler. (We can talk another day about what I think is the "win-win" fallacy.)

Not sure how to gauge this. I will say that sometimes I get people asking about reducing commissions, and except for the craziest of circumstances, we don't do that, and I always tell people that you can't expect someone to negotiate on your behalf any better than they negotiate on their own behalf. So if you ask them to take a reduced commission and they fold right away, that might be an answer.

Gut feeling
The intangible is important. At the end of the day, you're trusting this agent to guide you through a high-stakes process with money on the line. Do you feel they'll be a good fit to help you do that? If not, don't waste your time.

That's it, I'm off my soapbox. Good luck!

@Melissa J moore

I don't have any more information than said above but just thought I'd agree with Dan about ensuring you get the right coverage. You've got a lot of factors involved. Some of our Denver house hacking clients furnish the entire space, some furnish only the main areas. Then you have to worry about common area damage. 

Anyway, I'd reiterate that @Drew Fein's a good person to reach out to. 

A quick reminder that tomorrow at 6 p.m. we'll be discussing the ins and outs of Airbnb laws in Denver, Colorado Springs, and -- the newest law just passed -- in Arvada where the new ordinance allows for short-term rental investment properties. 

Here's just one example of an Airbnb deal in Arvada:

4br/2ba | 1700sf | $475,000, 10 minutes west of Olde Town, sleeps 10

$4,150/mo revenue (based off AirDNA estimates of $50,000 annual income)
- $2050/mo PITI (w/20% at 3.5%)
- $830 -- 20% STR management fee
- $300 -- utilities
- $200 -- repair savings
--------------------
$770 cash flow

And that's a conservative revenue estimate. If you bring it with the design elements and extra features -- game room, hot tub, outdoor space -- you can bump that up. 

@Zachary Saunders

Dude! That's awesome! Congrats on the big step. Love seeing the house hacking wins in Denver. Erin and I didn't think a thing about real estate until we were in our 30s. We've got five places currently and are working on our sixth, but we can't imagine where we'd be if we'd started earlier. 

Keep at it!

@Ramon Alire

Totally right. Thanks for the note. I've had a few clients buy in Ruby Hill. I think the whole area is an interesting place to be. Good luck finding that flip! 

@Jonathan Kimball

Welcome to Colorado Springs! The mountains are right here, the weather is awesome, and the city's offerings are growing by the day. I've never heard the words, "I just moved here and, meh, don't care for it." We own a SFH and a duplex with some partners here and are under contract on a second SFH right now. We'd been Denver snobs for years, but it seems like the Springs has pulled us in.

It's probably good to know a little more about what you want to achieve with the next purchase. Do you want to buy purely for the investment? Or is having a place to call home that you like part of the equation. Where you look and what you buy might change depending on the answer.

House hacking is probably your best way to achieve both -- get a nice-ish home and offset your mortgage with room rentals. (I agree with @Daniel Haberkost about the split level being a great way to house hack. Usually those have a separate living space down below, which gives your tenants (and you) room to have some privacy. 

You can rent those rooms long-term, or you could go the Airbnb route. Except for some increasingly rare pockets of the city where you can buy an Airbnb investment property, the most recent short-term rental law allows you to rent on Airbnb only in your primary residence. So if you house-hacked and lived there you could do that.

I also agree with @Michael Vialpando about the homes with basement apartments or carriage houses. You get the best of both worlds with this. Airbnb the separate space and then take a roommate in your main place. You'll likely live for free if not make some cash flow.

Good luck!