All Forum Posts by: Rado Stanchev

Matt, they could become expensive if not designed and managed well. Since I am an engineer and know a few things about construction I have built mine for about 40k. I had help from some sub-contractors, but did most of the work myself. This is still not a small amount, but it adds quite a bit value to the property. The downside is that it is relatively low cash on cash return of about 3% to 4%. I would agree that buying existing duplex or triplex is better, but it may be hard to find and "stinky old" and outdated. I would be happy to look at all kinds of opportunities of either fixing a duplex or even splitting a single family into two units. Let me know if you guys have any deals.

@ Bill S. Thank you for the input! I have found that doing construction while having a full time job and a kid is not an easy endeavor. Sometimes it is difficult for newbie investors to jump into a duplex or triplex right away so a more smooth transition after owning a single family might be easier transition for them. It's hard to jump into the fire with both feet if you have not done this before. Plus you get some invaluable construction experience. I guess the important thing is persistence and sticking to your plan. The reason why I posted this is shear what my experiences have been, it definitely is better to jump into a duplex or triplex to house hack that needs a little work, but that seems hard to find in Denver these days and the surrounding Denver Metro area. Thanks for the advise guys!

That sounds like a nightmare, but glad to hear that it was a success at the end. We are also house hacking our house currently in Arvada, CO and will watch out for the bedbugs and pick tenants wisely :) thanks for the input. You guys should checkout my post since we are in the same area it might be interesting to you :)

Hi guys and gals, I wanted to start a discussion on starting out in real estate investing by house hacking in a relatively hot market such as Denver, CO and the surrounding Denver Metro Area. I have found out through an investor friend of mine that one of the best way to start is to do everything yourself and house-hack. In my opinion when you are starting out you have to do most of the work yourself that is certainly the case unless you are absolutely amazing in finding the right people willing to help you such as real estate agents, lenders, contractors, tax advisors, etc. What I mean is that you still may need the agent and the lender, but you have to "kind of do" all the work yourself in finding the deal and getting the numbers to work. With that being said here is what my recipe/plan for newbie real estate investing is: 

1.  Work full time to meet your expenses, etc. Very important.

2. Find a house to live in as a Primary Residence (close the deal, etc.) say you buy for $250 and pay $1500/mt for that (including the whole shabang, mortgage, water, etc.). 

3. House-hack the property by adding an apartment (accessory dwelling unit, in-law apartment, etc.). Make sure your city zoning allows for that. That will allow for say $1100/mt in rental and maybe $1500/mt + if you are in desirable area for AirBnB (all pre-tax).

- do most of the work yourself such as submitting for permit, framing, plumbing, electrical, drywall and finish work etc. There are a lot of books in amazon on how to do a lot of that. And if you have a handy friend or relative you can have them help you.

4. Make sure to keep you construction expenses organized using Quicken or other software and use TurboTax to file your tax returns. (There are a lot of posts on how to do that).

5. You now have 2 apartments, so live in one and rent the ADU apartment to tenants or AirBnB

6. You are almost living for free ($1500/mt - $1100/mt = $400/mt), except the headaches from renting or effort you put into your AirBnB rental.

7. Get a HELOC (Home Equity Line of Credit) for the equity in the house you have built. That includes the added value for the ADU apartment. say that is $150k. Make sure it is fixed rate. And preferably a low rate.

8. Find another deal for say $350k (market has increased) and use $75k of your HELOC as a down payment (because you spent all your savings on house-hacking on the first property) and get a conventional fixed rate mortgage for the rest. Payment for that is about $2500/mt

9. House-hack again by adding another apartment ($1,100 or even better maybe adding two apartments $2,200) ..... use as little as you can from the remaining funds from the HELOC (preferably in the $50k range). You now have three apartments in this house providing you with say $2,200 + $1,500=$3,700. Your net return per month from the house is $3,700-2500=$1200/mt (pretty sweet given that you live for free in your first house)

10. Rent the three apartments and live in the first house you bought if you like your first house better. Or rent both apartments and live in the third and rent the other house for another $1500/mt, whichever you like more or whichever provides more income (you choose).

11. This is where it gets interesting! This is probably the time when you may need the help of tax advisors, and other lenders to help you get into your next deal and potentially save more money.

12. Work full time to meet your expenses, kids, etc. Very important. Live for free + get another $1500/month or more if you are on AirBnB and own two properties. Not bad!

Sorry for the long post, but I wanted to give you my perspective. Let me know what your thoughts are on this....