All Forum Posts by: James Carlson

@Kevin Rea I've lived in both Denver and Colorado Springs, and nothing compares to Denver. Great restaurants, multiple lively residential-mixed-with-restaurants/shop types of neighborhoods, the best craft beer, and amazing weather.

If you're looking to live in Denver, though, you gotta have money or you gotta get creative (rent-by-the-room house hacking or finding a home with a mother-in-law/basement apartment setup, etc.)

@Estevan Duran

Well, I'm always partial to Denver. Mostly because it's the best. ;) Tons of awesome developments going on. Many neighborhoods have their own vibe and their own little shops/bars/restaurants areas. The weather's awesome! (300 days of sunshine.) You're close to the mountains. We've got legal weed. The beer's great. Urban parks are everywhere. 

Now ... if you're asking about cash flow, Denver might not be it. It's a tough place. But long-term appreciation potential is looking good. Every kid and their two friends are moving here, and the jobs market is one of the best in the country. 

Anyway, I wish you luck in your decision. Cheers!

@Henry Lazerow

Yeah, Denver's freaking awesome. Great beer, tons of awesome restaurants and bars, multiple cute little shops/bars/restaurant areas tucked into neighborhoods, parks, mountains, legal weed, 300 days of sunshine. I could go on. And compared to Vancouver, one of the other cities you mentioned, Denver's cheap. (Which is saying something about Vancouver prices, because Denver definitely ain't cheap.)

@Darrel Hernandez

First off, good for you for jumping in. It's tough to break from the doing-research phase to pulling the trigger. 

Second, no offense intended, but I hate the question -- and it's one I see on here a lot and with my newbie investor clients in Denver and Colorado Springs -- of "what should my goal be"? There is no clear-cut, always-true answer. It depends on all sorts of factors and your priorities. Where do you fall on the spectrum of cash-flow vs. privacy? (This can determine whether you do a rent-by-the room house hack or a basement apartment or a duplex.) Do you prioritize being in a certain neighborhood or would you live anywhere to get the most cash flow? Are you all about cash flow or does future appreciation potential factor in? (This can change whether you invest in an attractive but expensive city or go out-of-state and invest in c-class neighborhoods.)

And in the end the truth is you will likely make mistakes with your first investment. I think it's great to dive in, learn from those mistakes and then get on to the next one. I know you didn't ask for this totally-condescending pep talk, but your "what should my goal be" triggered me.

Again, congrats on taking a big step. Good luck!

@Steve K.

I hear you about it maybe being complicated, and have had seller's agents in Denver tell me that. But I think that's just laziness. I don't think it's that difficult to understand that if you have five offers, three with escalation clauses, then each escalation clause gets pushed as high as each can go. At that point, it's just comparing top numbers. My buyers are willing to pay $2,000 above highest up to a max of $405,000. The other is willing to pay $1,000 above highest up to a maximum of $398,000. That second option -- with a top price of $398,000 -- pushes my buyers to $400,000. 

If I were a listing agent, I would almost break it down for my buyers that way, not really talking about the base price, but just saying three offers came in and here is the top price each are willing to go. 

All that said ... I think at a certain point, whether I think it's laziness that makes listing agents not want to receive escalation clauses, I do have to step back and say, Well, if they don't like those types of offers, am I putting my buyers at a disadvantage -- even if their top price would be higher -- because the other side will think we're difficult to work with. That's a different argument and one I'd listen to. 

@Jared Ortega

We work with clients in Denver and Colorado Springs, two relatively high-priced markets (especially Denver). I still tell my clients to make their first purchase their own home. Yes, this is self-serving, but I also think it's correct. You have to live somewhere, you might as well gain some equity from it. If you live in a high-cost-of-home-ownership city, then it's not like you can buy elsewhere and then rent for cheap. Rents are likely super high in that area as well. Plus, I think that first home -- be it a condo or a single-family home -- should be near you so you can get hands-on experience. 

As others have said, you can combine both goals. A couple options for that, from regular SFH ownership to various forms of house-hacking:

• Buy a small or moderately sized SFH in an area that will rent well to a family afterward and whose purchase price will give you a mortgage that won't outstrip the rents (or not by too much). In Denver, I'm thinking of East Colfax, Athmar Park/Barnum, Arvada, Westminister, Wheat Ridge.
• Buy a SFH and rent it by the room. This probably brings the greatest cash flow but also gives you the least privacy. (I have some young clients who are killing it doing this. (Here's the deal diary.)
• Buy a SFH home with a basement apartment or at least a separate entrance setup so you can rent the basement either on Airbnb/short-term rental or as a traditional long-term rental.

It's great that you're getting started. I wish you luck!

@Aira Alcantara

I'm too late for your benefit, I'm sure, but for any others who are reading this, here are my thoughts on competitive offer situations:

Consider an escalation clause 
I've had multiple buyers this year win in the competitive Denver and Colorado Springs markets with this tactic. I know some agents hate these, and I'd be interested to hear the perspective of someone who does hate them. But I think they're a way to put your best offer out there without overpaying for no reason. 

The way it works you offer a base price but put in the additional provisions that you are willing to pay X amount over the highest amount up to a maximum of Y price. Ex: You offer $350,000 but say you're also willing to pay $3,000 over the highest up to a maximum of $365,000. If someone comes in at $355,000, then you bump up to $358,000 and so on, but you won't ever pay above $365,000. 

If you do this, be sure your agent includes language making this clause contingent upon receipt of the other highest offer.

What else motivates the seller?
Is there anything else that would be attractive to the seller? Before any buyer of mine puts in an offer, I call the listing agent and find out what the seller needs, if anything. Do they need to stay a bit after closing? (Then let's offer a post-closing occupancy agreement.) Do they need to get out quickly? (Let's talk with your lender and see if we can squeeze out a 3-week close instead of a 30-day close.) Etc. Money is king, but sometimes other factors can help too.

Just ask how high the other offers are
Again, I always call the listing agent. And after enough time and trying to create a rapport, I will ask them flat out: What are the other offers looking like? At least in Colorado, it's against their listing agreement to tell me anything, but you'd be surprised how many will. If they demur, you can ask, "Well, is it a crazy situation? Are we talking $10k over?" Even if they've rebuffed your question the first, time, sometimes they'll give you hints with this second question.

Now, could they lie to you and tell you there's a really high offer when there isn't? Sure, but that could backfire just as easily because it might scare you off from offering, so no good agent should lie about that. And again, if you put in an escalation clause, then you protect yourself from overpaying.

Good luck!

Great info, @Blake Mitchell Two things stuck out to me in your response.

1. Separate entry door. Yes, that's a biggie. I know that can be $8,000 right there and quickly add up to more with all the excavation and framing and concrete work for stairs and potential drainage issues. 

I prefer that my clients avoid this entirely by just finding a home with an existing separate entrance. In Denver and Colorado Springs (and I imagine in many other cities) we search for homes with either that walk-out basement or a certain kind of setup with a backyard entrance that comes into a small landing and can turn into the kitchen door or straight down into the basement. We've got one client closing and two under contract on homes with this setup right now. That way, you put a solid door from the kitchen to this landing area and you have your separate entrance.

2. Don't skimp on insulation between top and bottom. I've got a listing in the Park Hill neighborhood in Denver right now that has a basement apartment, and she was smart enough to insulate the heck out of it so noise wouldn't be an issue. 

@Jesse Blaine

Yep, plumbing can be a pain if you have to pull pipes horizontally or run them awhile before finding the tap. We've had a number of clients in Denver and Colorado Springs put a kitchen in or finish a basement, but never do the whole scratch-to-mother-in-law-suite conversion. You're probably looking at $20,000 to start, maybe up to $30k. Not super cheap, but finishing a basement is one of the best value-adds to a home. Especially if you're going to get an Airbnb-able apartment out of it. 

As always, be aware of local codes. In most cities, putting a full second unit in a home zoned only for a single unit is not allowed. (Most planning departments consider a stove that requires a gas line or a 220v outlet to be the trigger for a "second unit".) Your options are to: A) Do the work unpermitted and take on the risk of the city finding out, which is rare but I have heard of happening; or B) put in something less than a full stove. 

Good luck!

@Dan Kim

Welcome to Denver! (Or Wheat Ridge. We'll accept you as a Denverite still.) And congrats on taking some initial steps into investing. My wife and I only bought our first place five years ago, and now we have five doors. Looking to add a sixth. Slow, steady. In another five years, we could probably stop working if we wanted to. 

Have you spoken to a lender yet? That's always a good first step. 

Sounds like you've got the right idea. Some of our clients come in with ambitious plans, and that's great an all, but I advise my buyers to keep it simple on the first one. Duplex is great if you can find one or just a solid SFH that will work with rental numbers if you move out. And yes! The mother-in-law/basement apartment setup is awesome for that first-time purchase. I have two Denver clients under contract on such properties right now -- one in Aurora, one in Athmar Park -- and another looking for a similar place in Colorado Springs. It's a great way to get a home that you might like living in and income to offset your mortgage (all while maintaining some privacy that you don't get with the rent-by-the-room strategy).

Anyway, good luck!