Anywhere in Denver/Boulder area in my price range?

Question

Hi, I'm 22, single, with very modest student loan and car debt, living in the Boulder Area. I don't have a lot of money, but I'm making enough to get by. What I want to do is buy a single family home, live in it for a year to satisfy FHA requirements (and if at all possible rent out all the extra rooms during that year to help pay for the mortgage), and then rent it out. Problem is, Denver is nuts right now. And so is everything within 50 miles of it seemingly. Are there any neighborhoods where I can still find houses under 70-80k?  I don't care about the property value bubble in Denver right now, but I want to take advantage of that sweet sweet 3% vacancy rate. Anything within a half hour commute to Boulder or Denver would work.

Austin S. · Answer

Do you have some addresses? I could give you a quick estimate to see if it jives with Zillow. I personally don't use Zillow.

Jean Bolger · Answer

One other potential pitfall is that many of the cheaper condo complexes are not eligible for FHA financing. This doesn't necessarily mean the complex isn't in good shape, or that the HOA is in financial trouble. FHA won't lend on complexes that have a lot of non owner occupied units, or on complexes where a certain percent (10?) of the units are owned by any one entity. You can still get financing from many sources on these, but it may not be the 3.5% down. You might find 5-10% though.

Here's the website where you  can look up condos by zip code or name and see how they stand in regard to FHA (approved, expired, etc). The associations have to reapply for this every year or so- some can't qualify and some just don't bother.

https://entp.hud.gov/idapp/html/condlook.cfm

Some properties that are called condos  are actually townhouses, and vice versa. lots of confusion around this, but if the property is legally a townhouse, then you can get the FHA loan.

Bill S. · Answer

@Dylan Wright welcome.

You might find someone to share the ownership of the property with and there by increase your available down payment. You should have an iron clad exit strategy as well.

You also might consider a 2nd job to ramp up your savings for a down payment or to pay off your car so you can increase your debt capacity.

Tim Toney · Answer

Greetings from Erie. Check www.rentometer.Com against the zillow number to give a solid comparison. I am new to this game as well so I am comparing and learning too. Good luck.

Dylan Wright · Answer

I'm finding houses on zillow.com in the 40-50k range with estimated rents of 1000/mo in sterling. Are zillow rent estimates usually inflated or could I expect to rent a small 3br for that?

Austin S. · Answer

@Anson Young I currently have one that is vacant that I should be able to bump the rent price to 2% monthly of my all-in investment. I purchased it a few years ago and to make rent-ready I am invested at $44k ... I should be able to get $900 per month in a new lease ... I was only getting $750 and was probably quite a bit under market. The other property I own I am all in at $40k but it is only getting $675 per month, it is very small so it is only at the 1.6% mark. The prices have steadily increased in the past few years so I haven't been looking to purchase unless a smoking deal comes up but you could still probably find some 1.5% deals out there.

Anson Young · Answer

What are the purchase to rent ratios out there?

Dylan Wright · Answer

Yeah, sterling and Pueblo wouldn't be too bad if I had the money to drop a down payment and manage the property remotely. But it looks like I'm going to have to go the FHA route, which means I have to live in the place for the first year right? I have an awesome job with offices in Boulder and Denver, I don't want to leave. So condos - only a good idea if the HOA is reliable. But that's the main problem right? As long as the Financials look good and I'm comfortable with the HOA, there's no other major pitfalls?

Mindy Jensen · Answer

@Austin S., not a dig at all about Sterling. Just pointing out that it isn't close to Denver or Boulder. Sorry if it came out wrong! :)

@Dylan Wright, I have owned exactly two condos. I will never ever own another one again, because every single year I lived in one, I had to pay a "special assessment" to fund a repair bill. Every. Single. Year.

I'm sure there are well-run condo associations, I've just never been able to find one...

Austin S. · Answer

@Mindy Jensen I can't tell if that is a dig about Sterling and Pueblo or not, haha! I live in Sterling and quite like the area. Rental market is very strong out here, especially with a lower entry point into properties. Wouldn't mind speaking with anybody about partnering, if anybody is interested in the area.