All Forum Posts by: Jeff White

The best tenants are usually 650+, but right now , finding tenants is tougher since less people move during the holidays, so you won't necessarily get the best ones, but credit score is like a story on how they pay bills, so people with higher credit scores will probably be quality tenants , but the flip side, if they can afford a high rent in an A area of Denver, then they might want to buy in a year or two

@Caio Ferreira Torres Congrats on getting done with your first one, I started back in 2017, and I've house hacked 7 times since then with a W2 making about the same when I first started, so it is totally possible, you need to understand how lender's calculate Debt to Income Ratio, it isn't just adding mortgages to the denominator. 

I would talk to a lender, they look at your Schedule E section of your tax returns and add back depreciation, so basically, as long as that number is greater than the mortgage, your property will be a net zero on your debt to income ratio or it will be at a positive best case and small negative worst case, so you only have to really qualify for the next property. It is hard to explain in BP, but I would talk to a trusted lender, and he can walk you through it. 

It is possible to qualify for multiple mortgages using the house hacking strategy each year with a solid W2.

@Joe Paul Already great advice given in this thread, Dan especially!

I've done rent by room strategy for my rentals since 2018, and it is a very good strategy when done correctly with proper screening and fit. 

Additionally, with rent by room, sometimes it is all about fit, and you can't screen for fit really since every prospective tenant will tell you what you want to hear when you meet them for a showing or property tour, and they might pass all your background, credit and income requirements.  

With fit for rent by room, you have to start with 2-4 month leases, that is huge because you aren't locked into a long-term lease with any one roommate tenant, and you can stagger a few tenants if you want a little more stability. After they pass the 60 day mark and show their habits - good and bad, you will have a good idea if they are a good fit by how they pay rent, how they get along with others, how they respect your house, how they throw the trash out, etc. 

If they pass that test, then you can renew them for a 6-12 month renewal since you know they are a good fit for the house, with others, and with you and your wife. 

By this small change, you avoid the majority of roommate to roommate issues, and with less conflict, you have more stability and long-term tenants and less vacancy. 

Also, after moving out, the screening and tenant placement doesn't change, you have the same methods as before except now, you are renting out the room you are vacating.

Rent by room is a fantastic strategy, but you can't cut corners, and don't rent to friends or family. Strangers aren't danger if you screen them correctly and start off with short leases. That's the difference. 

@Rafi Barash  Congrats on taking the first step, usually people get hung up on too many strategies, and the best way to start your real estate investing journey is house hacking, especially right after college. 

I think that is very impressive that you have 75-115k saved up to invest in your first property. That's amazing place to start.

I'm a local investor and realtor here in Denver metro, and I've found success with house hacking here in Denver for myself (rent by room, Airbnb, Section 8, LTRs, etc) along with my clients too. It is that powerful of strategy that speeds up your time towards financial independence much faster than any other strategy!

Currently, there are a few ways to house hack in the Denver metro area and still live for free depending on your level of comfort.

1) Rent by Room - personally, my favorite strategy, you buy a large house, live in one room, and rent out the other rooms. This strategy is very effective, especially on houses with lots of parking and houses with lots of bedrooms and bathrooms in areas near the popular locations around town. 

Realistically, you can get $750-900 per room that shares a bathroom, and $900-1100 per room that has a private bathroom. If you do the math, when you get to 6+ bedroom houses, the numbers work out better with living for free and also cash flowing while living there. My last two clients closed on houses that became 8 bedrooms rent by room house hacks that cash flow, so it is possible in this market. 

2) STR - Short-term rentals or Airbnb. This strategy is great, but it fluctuates depending on the time of year, you probably won't live for free because it is more challenging since you are only Airbnbing a small space or basement unit.

3) MTR - this is a good in between style of creative strategies since you can furnish a place nicely that would rent out on Airbnb but you want a long-term high quality tenant like a travel nurse or corporate rental that stay for 2-3 months vs. under 30 days for most Airbnbs.

Combining strategies is the best way to go, ideally, you would find a house with a separate entrance or walkout basement, live upstairs in the one of the bedrooms, rent out the other upstairs rooms and STR/MTR/LTR the bottom unit. You get the best of both worlds, and would easily live for free and probably cash flow, even with a 7% interest rate.

What are your short-term and long-term goals?  Do you want to add value? Do you want cash flow? Do you want higher appreciation? A little bit of both?

Personally, I don't recommend starting with properties with HOAs since HOAs can restrict your ability to house hack it with different strategies, and they can even restrict your lease from being under one year. 

Here's my answers to your questions:

1) It depends on your goals, some investors want more privacy, so they understand they won't get the same cash flow as someone that wants to rent out all the bedrooms and live in the smallest rooms. On the other side, some investors prefer great locations closer to work or closer to things that they desire (bars, restaurants, parks, etc), and they understand they won't cash flow as much due to the higher purchase price for those areas. So, it goes back to your goals...do you want more cash flow?  Do you want more appreciation?  Better area?  There are lots of areas that still work great.

2) I would stay away from multifamily properties for beginning investors due to high purchase prices for multis and high maintenance/deferred maintenance as well. They aren't good for investors that are looking to house hack in Denver metro because of those reasons. 

For townhomes, those usually have HOAs, and with HOAs, it can be an issue too since you can't control if the HOA changes policies on short-term rentals, lease lengths, etc, so HOAs can be your worst nightmare even if they appear good today.

3) It depends again, do you want higher cash flow? Do you want to live close to Sloan's Lake and put a little more down to make the numbers work?  There are plenty of areas close to the popular areas that work just fine where you don't need to put so much down. 

Hope this helps!  I'm very passionate about house hacking, and I think it is the best strategy for any investor just starting out from college since you have the flexibility. Let me know if you would like to connect, it is a great time to buy in Q4 2023 since your competition isn't nearly as intense, and you can get a better deal now than you will in Q1 2024. 

@Brenna Ellison Hi Brenna, I have a someone that can help that I've used for my properties, I've sent you a DM too. 

@Adam Gusky Have you thought about houses with ADUs/Carriage houses as well?  

It gives you the privacy you want while allowing you to house hack with only 3% conventional loans.

Since you are paying a premium for rent, the other option is to wait to the fall/winter to purchase a better deal since you don't have much competition and can negotiate easier for a single family with ADU/Carriage house or a nice duplex.

Also, you can easily use FHA financing with a duplex, and there are some nicer duplexes out there in Denver metro. If you are goal is to reduce your living costs from $2,850 per month rent to under $2k per month, you can definitely accomplish that.

@Ben Einspahr Great job Bartley, this is a perfect example of a house hacker with a family that is making things happen, and this property stood out because it was rent ready condition, and it still gave full privacy to Bartley's family while still letting him rent out the other ADU unit above the garage, and the backyard is easily the best backyard I've ever seen in any house, so I'm super pumped for him and his family.

@Adam Gusky Welcome to Denver!

I think that is very impressive that you have 60k saved up to invest in a rental property. Congrats!  If you just want to buy a investment property, with 60k saved up, you are probably looking at small condos since you need 20-25% down payment for a investment property, and best case, you are looking at cash flowing $200 per month with an 8% interest rate if you find the right investment property.

Have you thought about house hacking?  It is the easiest way to invest, lowest barrier to entry, lowest interest rate, and lowest down payment required. 

I'm a local investor and realtor here in Denver metro, and I've found success with house hacking here in Denver for myself along with my clients too. It is that powerful of strategy!

Currently, there are a few ways to house hack in the Denver metro area and still live for free depending on your level of comfort.

1) Rent by Room - personally, my favorite strategy, you buy a large house, live in one room, and rent out the other rooms. This strategy is very effective, especially on houses with lots of parking and houses with lots of bedrooms and bathrooms. Basically, you can get $700-800 per room that shares a bathroom, and $800-1000 per room that has a private bathroom. If you do the math, when you get to 6+ bedroom houses, the numbers work out better with living for free and also cash flowing while living there. 

2) STR - Short-term rentals or Airbnb. This strategy is great, but it fluctuates depending on the time of year, you can still live for free, but it is more challenging since you are only Airbnbing a small space or basement unit.

3) MTR - this is a good in between style of creative strategies since you can furnish a place nicely that would rent out on Airbnb but you want a long-term high quality tenant like a travel nurse or corporate rental that stay for 2-3 months vs. under 30 days for most Airbnbs.

Combining strategies is the best way to go, ideally, you would find a house with a separate entrance or walkout basement, live upstairs in the one of the bedrooms, rent out the other upstairs rooms and STR/MTR the bottom unit. You get the best of both worlds, and would easily live for free and probably cash flow, even with a 7% interest rate.

What are your short-term and long-term goals?  Do you want to buy a fixer upper? Do you want to add value?  Do you want cash flow?  Appreciation?  A little bit of both?  

@Jenny Kao Hi Jenny, it is a great time to buy properties, competition isn't nearly as fierce as it would be if rates were under 6%, so that is good news for looking for a rental property.

The tough decision is deciding between two different states. Why CO vs. AZ? Do you live in one of those states. 

It really goes back to your goals, you can easily find exactly what you are looking, but what are you goals?  Cash Flow?  Appreciation?  A little bit of both?  Do you care about location?  Those are the big questions to ask yourself.

@Sara R. I agree with others here, I think you need to talk to a few more agents. 

Are there investors that are selling because of the rental license requirement?  Sure!

Are people still buying house hacks, new primary residences, and investment properties in Denver?  Absolutely!

Also, I've done the rental license inspection checklist, and it is basically just health and safety items every good landlord should want for their rental units anyway, so it is a minor inconvenience and a small cost every four years.

Denver is still a great place to buy, even with the rental license component now. 

Also, as an realtor, my clients have purchased in city and county of Denver in the last few months, so I wouldn't let one person's opinion determine the overall market condition.