How can I get my foot in the door in colorado

Question

So I've been taking my first steps toward home ownership because I can't stand the thought of throwing money out the window every month for rent. Ideally I would like to find a house hack property but in Denver that's proving to be extremely difficult. I met with a lender and was pre-qualified up to $270k and found a realtor to try to start getting some leads. I'm at a point in my life where I don't mind living in a place that needs some serious work and I have all the tools in my wood-shop to do most of it myself.

HOWEVER my realtor inform me that the distressed properties I've been looking at do not qualify for conventional financing so I would need to start looking at newer homes. I can't afford the down payment on a newer home so HOW CAN I GET MY FOOT IN THE DOOR IN DENVER?! It's starting to seem impossible without saving up for 20+ years, so I turn to you BP friends...what should my next step be?

CHFA, 201k, FHA etc?

Matt M. · Answer

I'd avoid the 203k loan and anything that requires major fix up. You need CASH to do any fix up outside of a rehab loan.

Commerce Bank has a lower APR 10/1 arm that might help you qualify for more. I can get you Megan's info if you want. I'd look at a 3 bed 2 bath townhome and rent those 2 rooms out.

You really need to be leaning on your agent to help you. That's his/her job. If they can't then find someone who can.

Brandon Carriere · Answer

I know the Denver market has been bonkers (like Vegas) over the last several years..    Why would you want to buy something at or near the peak?   Especially if you don't have money for a legit downpayment, or renovation?

Odds are, 5-7 years from now, prices may be the similar or less than they are right now..  A majority of the potential appreciation has to be baked into the current prices at least for the short-medium term..  And I'd imagine rents should be close or even cheaper than the cost of a current FHA mortgage?  What are average price points there, 350-400k or more?  Unless Denver has morphed into Palo Alto overnight, how much higher can those prices be sustained?

I guess the point is, there's no need to rush into something now..  You've likely missed the boat and can probably do better with the Cardone philosophy and investing the money you have and rent your primary home, for now.

Timothy Howdeshell · Answer

Hey Justin,

It seems like there has already been a ton of great advice here. I was in pretty much your exact same shoes 1.5 years ago. I managed to make it work by buying a condo using CHFA, refinancing out of the loan after 6 months (way lower interest), and spending all of my free time and money for a few months finishing the basement. You can read the write up here: https://www.biggerpockets.com/forums/223/topics/54...

I would say definitely keep looking with your agent, and forget about the SFH for now as others have said. Good luck!

Chris Lopez · Answer

@Justin O'Malley Skip the 203k loan. They are hard to make work in the current market. I know GC's who have trouble getting bids from their subs in a timely fashion. It's going to be hard to get bids on work in a timely manner. Plus, good luck finding contractors who want to deal with the timelines and paperwork. They don't need or want a headache. They have plenty of work elsewhere.

Do what others suggest and find a 3/2 condo or townhome and rent out the extra bedrooms. Don't get fancy in the beginning and never take action. The simple fact of redirecting your spending from rent to a mortgage is huge.

Last month I helped a client close on a 270k condo near downtown. It was their first house hack and should be neutral cash flow when they move out in a year. Acquiring properties (and keeping good financial reserves) pays dividends down the road.

James Carlson · Answer

@Justin O'Malley

I don't mean to dog on you specifically because I think it's awesome that you're making moves, but to be blunt ... in 2018 there's really no such thing as the $270,000 3/2 SFH in the Denver metro area. It sucks, but it's true. This site is awesome but it doesn't always set the proper expectations for those living in the hot markets.

For instance, on market right now, I see maybe three stand-alone homes with at least 3 beds and 2 baths in the Denver area, and they are all either mobile homes or have major foundation issues. If you expand your search, you could maybe find something in Frederick, an hour north, or Lochbuie, 50 minutes northeast of here. (Lochbuie? Didn't even know it was a town.)

But don't get discouraged. Getting into the market in anyway you can is a solid step. Some options:

• I agree with @Matt M. What about a condo or townhome? That opens up 3br options and allow you to house-hack, build equity, and practice this whole RE thing. That's how my wife and I got started. Do that, and your options in southeast Aurora and in Westminister/Thornton open up.
• Are you willing to live on the north side of Colorado Springs? We work with a lot of clients down there, and you can still find a home at that price. (Though wait another year and a half and it might be an endangered species even in the Springs.)

I know the house-hack idea is so sexy in a house. But the truth is that a lot of people are getting priced out of Denver. Find anyway to get into the market -- even if it's a condo/townhome -- because you've got to live somewhere. Might as well build equity. Then you can expand your investments to out-of-state or Colorado Springs, etc. Good luck!

Kyle Doney · Answer

Focus on making money and dont worry about missing out. Houses are money pits and if you dont have the money to put out for a downpayment you certainly shouldn't be buying a fixer upper.

Who knows, by the time you save up money in a year or two (if you work hard), properties could be much less and you will be glad you waited! Embrace grind mode and start earning.

Teri Feeney Styers · Answer

@Kevin Grinstead I would say an FHA 203K is for you. Talk to your lender again. Two of my kids have used these with great success in creating equity. Maybe something with an unfinished basement that you can convert to a small apartment for extra income too?

Alexander Lundy · Answer

Hey @Justin O'Malley, in looking back through some of your posts in the last two years, it's clear that you are determined and want to get the ball rolling on your real estate journey. You clearly want your first deal to be a good one, which I commend! But I think in your attempt to have your first deal be a smash hit, you aren't realizing you are losing out on a valuable asset every day...time.

Due to your existing resource constraints, it sounds like you may want to focus on just getting on base for now (getting a respectable house hack). Had you done that a few months after your first post (about two years ago) you could have had 1.5 years worth of assisted principal down payments from roommates and even some appreciation by now. As of today (1/13/19) there were 1 properties in Golden, 7 properties in Lakewood, and 77 properties in Denver that sold in the last 180 days with 3+ bedrooms, for less than $250,000. The focus on 3+ bedrooms being the strategy of renting by the room to maximize the effectiveness of your house hack. If you're willing to go a little further out into the Denver suburbs there are many more options.

These sales show there are decent options out there for a respectable house hack that can keep your monthly housing costs low, allow you to save more for future deals, allow you to start building equity, add some sweat equity (as you have said you are interested in doing) and perhaps if this spring is shaping up like the data suggest, even allow for some single digit appreciation (from Feb - June).

I spent 2016-2017 looking for a SFD (single-family detached) house that I could afford in those same areas, but ultimately realized I was losing a lot of time, and that the market was running faster than I could. Additionally I didn't have the resources to secure the few good deals I did come across. If I were you (and essentially two years ago I was in your same shoes) start focusing on getting a deal in an area you would be comfortable living in for at least a few years, that keeps your monthly housing costs as low as possible, and utilizes the beauty of renting by the room. This would shape up to be a respectable house hack and would at least allow you to get your housing costs under control and start building up your assets as you hunt for a home-run deal.

JD Gunter · Answer

Some great advice here!

I agree that there are still options like that here in Colorado Springs, but they are getting more rare as well. Thankfully our prices haven't reached Denver levels yet, but we are getting there.

Our average SFH price is around $300k, so we are attracting lots of people from Denver who can't or don't want to swing the prices. The north side of Colorado Springs is getting further and further north to meet this need. Let me know if you want any specifics.

Best of luck!

Justin O'Malley · Answer

In Denver it is much easier to house hack a Single Family Residence so that's what I've been shopping for. I'll have to read up on the homestyle renovation package, thanks @Jerry Padilla!

How can I get my foot in the door in colorado

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