All Forum Posts by: James Carlson

@Ryan Fisher

Yeah, likely just a bad deal. Not sure where they think they're getting that $460k number from. In a lot of other areas of Colorado Springs, that's not a bad price for a 4-plex, but you just can't demand the rents out there. Maybe you could short-term rent one of them on Airbnb, like @Aaron T. suggested, but you can only STR one of them with the new Airbnb rules passed by COS city council. (And even then, you have to make sure your property is outside of a 500' bubble from any other non-owner occupied short-term rental.)

Keep up the search! Good luck!

For your reference: @Erin Spradlin

@Jesse Park

Well, all the above answers are great. Here're my thoughts for what they're worth.

1. We definitely see 4-5 bedroom homes that work for this rent-by-the-room house hack in Denver. (I'm looking at you @John Mayer.)
2. I'm on the 5% boat as well BUT ... I also think everyone feels comfortable with different things. Some people are on the Dave Ramsey boat and don't like debt. I think it's better to use the extra money for a future property, but your comfort level should be a factor as well.
3. ADU is a good idea if you're going to live there for awhile because it's one of the only ways you can run a short-term rental on Airbnb in Denver full-time. The cash flow for that is pretty good. In terms of equity gains, though, I don't see them adding enough yet to make it worth it for resale value.

I wish you luck!

@Ryan Fisher

Congrats on taking a big step. Colorado Springs is an interesting place to buy an investment property right now. It's actually pretty tough to do a traditional long-term rental that cash flows. You can get creative -- and a lot of our buyer clients in the Springs are doing so -- by using a rent-by-the-room model but that can also be a little bit more work. Now, this site will tell you that if it doesn't cash flow, then don't buy it. I'm not as strict. There are other ways that real estate makes you money, and I don't like to discount those. (Depreciation on taxes, appreciation in value and mortgage buy down with renters.) In Colorado Springs, the appreciation looks pretty good long-term. So much inflow from out of state. And the Springs continues to see itself listed on any list of best places to live. (The list doesn't mean anything, but it does signal to young people that they might want to consider it so you're going to continue to see more people moving here, more people needing house and the prices and rents therefore continuing to rise.)

If you're buying a pure rental, you'll likely need 20%. (You might be able to get away with 15% with some lenders.) But you're not going to find a 5% down investment loan. Are you considering living in the place? If so, then for sure, go for that low-down owner-occupant loan. (Either 5% conventional or 3.5% FHA.)

You can do a live-in house hack if you wanted...either rent-by-the-room for the rooms you're not using or find a nice place with a basement apartment or carriage house so that you maintain some privacy but still have an income suite to generate revenue. (I'm going to guess if you're married, that the second option would be better.)

Whatever you're hoping to do, the best place to start is to find a lender who can walk you through the options and a good investment-minded agent to guide you in the market. I wish you luck!

Not to pile on, but NO, $3,000 is not a fair price for a water heater in Denver. In fact, it's more than double. We've had several clients replace there's and it's anywhere from $800 on the extreme low end to $1,400 on the higher end.

@Erin Spradlin and I helped some clients buy this Park Hill home in Denver in spring of 2018. The goal was two-fold: 1. find a good home with good schools near enough to the city center and hopefully walking distance to things to do. 2. find a home with an income suite (basement apartment, mother-in-law suite, etc.) 

It's basically house hacking with more privacy and no goal of moving on to the next. This was a forever home (or at least a next-5-years-home). Because half the goal was to find a good home, completely covering the mortgage was not mandatory. Simply getting some mortgage offset was intriguing to them.

THE HOUSE

An 1800sf, 3br/2ba SFH with a basement apartment with separate entrance. (900sf, 2br/1ba upstairs. 900sf, 1br/1ba downstairs.)

The home check all the boxes they were looking for. (Photos are at the bottom.)

HOW DID WE FIND THE DEAL?

The MLS. We have searches set up that find properties with income suites.

THE NEGOTIATION

The middle of 2018 was a hot time in the Denver market (as it was in Colorado Springs). This was a well-maintained corner-lot home in a good school district within walking distance to an ice cream shop, a brewery and a cafe. It had a basement apartment. It was multiple-offer situation. 

Erin used an escalation clause in the contract to put her clients in the best situation to get the home but not overpay. (Quick side note: An escalation clause is where you say, "We're offering X amount but are willing to pay Y amount more than the highest offer up to a maximum of Z.") In the end, the clients got the house for $5,000 over ask, which was significantly less than the maximum they were willing to pay.

THE NUMBERS

Purchase price: $554,000

PITI (principal, interest, taxes & insurance): ~ $2,900

Rents: between $1,450 and $1,900. They ran the basement apartment as a short-term rental on Airbnb for five months. They averaged $1,900/mo during that time. Now they rent it as a medium-term furnished rental for $1,450, which in my book is better. Sure, it's slightly less money, but the reduction in work is enormous.

CONSIDERATIONS

Anyone wanting to house hack with Airbnb needs to be aware of the laws surrounding short-term rentals. Denver is about to pass new laws, for instance, further defining the primary residence rule. And Colorado Springs just passed an ordinance severely restricting their short-term rentals. 

Currently -- and likely going forward -- this style of Airbnb is totally allowed. Basically, as long as you live in the house, you can rent out a portion of it on Airbnb.

PICTURES

Basement living room and kitchenBedroom in the basement apartmentThe separate entrance to the basement apartment.Upstairs living roomUpstairs living room.Upstairs kitchen.Upstairs bedroom #1Upstairs bedroom #2Backyard deck.

@Andrea Livingston

Congratulations! That is a great price for just about anywhere in the city of Colorado Springs! Are you going to rent it long-term? Or do a rent-by-the-room model/medium-term furnished rental model? Like @Daniel Haberkost said, down by the base, you have a built-in market for renters. We had a client close on a property down there a month ago and he's renting by the room and doing well with it. 

Circle back around when you get it up and running. I'd love to see how it's going. Good luck!

@Marcus R.

Thanks for the comment. I think it's a pretty good idea too. There is so much demand in Denver for room rentals as people continue to search for cheaper rents amid the exploding rent prices. Proximity to the hospital is just a bonus to have another potential market of renters to tap into.

Cheers!

Come learn the short-term rental laws and opportunities from Colorado's Airbnb experts. The class is FREE

We'll discuss:

• Proposed changes to the "primary residence" rule in Denver
• The criminal charges filed against Denver STR owners
• Other changes the city of Denver is considering.
  What you can do in Denver and Colorado Springs ... and what you can't
• How to use the Airbnb laws to reduce your mortgage on your primary residence
• Insurance products to protect you

We'd love to have you RSVP either here on BP or through our site so we can give the venue an accurate count.

@Marc Allen

You are exactly right. We've got a map we developed with the current STR permitted homes in Colorado Springs and you'd be surprised how few areas fall outside of a 500-foot bubble. The city has to develop it's own searchable map at some point. The current situation is untenable with having to call for every single property.

And yes, even if you were buying a property currently being used as an Airbnb short term rental, it's likely within 500-feet of another existing one and once it sells, it falls under current rules and therefore is likely not allowed. 

The whiplash of Colorado Springs city council action on STRs is still hurting my neck. We're seeing the same issues with our clients. I wish you luck.