All Forum Posts by: Kevin Smith

Hey @Ryan Russell,

Probably not the response you're looking for, but I do know a PM in Denver that handles rooming houses and deals with these sorts of scenarios.  Happy to pass along their info if it's of any interest to you.

Best,
Kevin

Hey @Joseph Lalia

I noticed you mentioned the 80221 zip code.  Is it in Adams County?  A Denver mailing address in Adams County is Unincorporated Adams County, which does in fact allow for non-owner-occupied STRs.

If it is in fact city and county of Denver, then yes unfortunately no matter which person or entity holds title, you would need to prove you're living there to get approval for a nightly rental.

As far as companies or individuals offering management services, I can pass along a list.

@Melissa Block

I'll echo what @Randall Alan said.  If they're a professional, they'll appreciate the feedback whether or not they agree with your assessment.  If they throw a tantrum or tell you you're crazy, it's probably not someone you want to do business with.  

If you think a deal could be done if you just had the right price (perhaps not with this one given your comments on the floor plan), it doesn't hurt to just check back in with them every so often to see if anything has changed.

To your comment about how could someone possibly make money, it could be that they actually lose money on the deal, or they have alternate plans including holding long term, redevelop, live in flip, etc.  As far as saving on costs, they may have access to cheaper money (private lenders, better hard money terms, cash, or line of credit), shorter hold times leading to lower holding costs (experienced flippers can turn a property quickly), and they may be able to do the listing themselves when they sell in order to save the 3% they would give a listing agent.

Hi @Melissa Block

If this is an established wholesaler in our area, don't be surprised if someone buys their "deals" quickly.  You're often competing with experienced buyers that can make a decision quickly and accept slimmer margins.  I noticed you're looking for 20% profit in your calculations.  Historically, that was a good goal, and for someone starting out should allow for a margin of safety.  That said, the last few years, many of the flippers in this area have been getting 8-12% profit given how competitive it's been.  

Also, as others have said, take ARV and rehab estimates from wholesalers with a grain of salt. You're doing the right things running your numbers conservatively and bringing your contractor to your walkthroughs. We say it often, but it bears repeating: it's a numbers game. For every deal you do, you will probably have to look at 50-100.

If you ever want a check on your ARVs, don't hesitate to reach out.

Best of luck!

Hey @Danny Morrell

Going the traditional route (self funding and using conventional lending products) will be tricky with $10k, so I'll throw out a few alternative ideas you might consider.

House Hacking
As others have said, House Hacking can be a great way to get started.  Rent out the spare room in your primary residence, and use the extra income to save for future down payments.  Once you've been in the property for a year, you can repeat the process, but then you'll be able to rent out all of the first property.

BRRRR
Imagine a scenario where you find a fixer upper that you can buy for $80k, put $30k into it for rehab and have it then appraise for $150k. You could use hard money plus your $10k to get it renovated and rented. Once it's rented, you could get a long term DSCR loan to pay off the hard money and get back your $10k. You're probably not going to find that price point in the Denver area though, which brings you to OPM...

Other Peoples' Money
Who do you know that has money, would like to invest in real estate, but doesn't have the time or knowledge?  They can fund your deals with the understanding you'll find, negotiate, and manage the deals.  A simple example would be say you found a small multi-family in the Denver area for $800k.  Your partner could bring the ~$200k down payment.  You guys form an entity that owns the property and split the cash flow.  (As a side note, in the Denver area, I'd be looking to do furnished rentals; otherwise, the cash flow won't really be there - at least not for a few years).

Rental Arbitrage / Co-Hosting
Do you know a landlord with a nice condo they're tired of dealing with?  Propose they lease it to you with the understanding you'll operate a furnished rental out of it.  Explain it will be hands off for them as you'll handle all guest interactions and minor maintenance issues.  Point out you'll have insurance in place and will be getting the property professionally cleaned on a regular basis.  You can use your $10k to furnish the property.  If you play your cards right, you should be able to net $500-1000/mo in the Denver area with this strategy.

Best of luck!

@Patrick Farley

If he sticks with 30 night minimum stays, it shouldn't be an issue.  I know some folks who utilize this strategy around Denver.  Unfortunately (or fortunately depending on who you ask), most municipalities around Denver have the primary residence rule.  The exceptions would be Arvada, Wheat Ridge, Centennial, and Unincorporated Adams County.

@Kunaal Kumar

Private pay assisted living may be an option.  It's a lot of work though, so if you're not interested in that, you could lease it to an assisted living operator.  They may be willing to pay above market rent (enough for you to cash flow) since they generate so much income.

- Kevin

@Eric W.

You might be surprised how much income STRs can generate in this area.  An average monthly gross of $7k is definitely possible, and I'm thinking your mortgage would be under $3500.  The free account with Airdna gets you access to their "Rentalizer", so you can plug in an address and number of guests and see estimated revenue.

Also, you may be able to get by without a PM since you mentioned having family in the area.  You can automate messaging, check-in, and coordination with cleaners.  In the event of something urgent, you could have a handyman or relative swing by.

As for holding off on the purchase, as the market is cooling, and we're moving into the slow season, things are less competitive for buyers than they've been in a while.

All that said, if you were really leaning towards a traditional rental, many investors have been buying in Pueblo.  With your budget, you should be able to find a small multi-family there.

Hey @Joseph Lalia

I'm guessing your builder's contract is not assignable.  In which case, you would not be able to "sell" it before closing.  You'd want an attorney to review it, but look for language around assignability.  Keep in mind, when assigning, the new buyer is typically a cash buyer, so you avoid financing issues.

I would also shop around with some other lenders to find some better terms.

Finally, have you considered the furnished rental route or renting by the room? If it's Denver proper, you wouldn't be able to do a nightly rental, but you could do a so-called medium term rental where you rent it for at least 30 nights at a time.  Typically, these bring in more than a traditional long term rental, in which case you may be able to cover your mortgage until you can sell or refinance.

Hey @Patty Nisbet, as others have said, speak with your current landlord about shifting to a month-to-month lease.  I would plan on the process taking 4-6 months.  It could take less time than that, but you really don't want to feel rushed just because your lease is up.  Do you have your financing lined up?  If not, you definitely want to get that process started first.

You mentioned going the short term rental route.  If you want to continue using the property as a short term rental after moving out, you'll need to stick to Arvada and Wheat Ridge (unincorporated Adams County is also an option, but you mentioned wanting to be on the west side of the city).  For most municipalities in the area, if you're not living in the home, you can't use it as a short term rental - Arvada and Wheat Ridge being the exceptions.

As far as estimating income, you can start with Airdna.  The free account will give you an income estimate for a given address.  If you're considering a property, enter the address into Airdna along with beds, baths, # guests, and it will give you a decent idea of expected income.

If you're concerned about privacy, you may consider a small multifamily property or a property with an ADU (mother-in-law suite, carriage house, etc) as opposed to renting out the basement.

You'll want to work with an agent familiar with these things, and he or she can walk you through it.

Good luck!