House Hacking in Denver, Colorado?

Question

Hello BiggerPockets Forums,

This is my very first post with BP, but I am ready to reach out and learn about what REI has to offer. To give some context of my plan/vision, I will be moving out to Denver, CO in the Summer of 2021. I am looking to purchase my first home, but I am a complete newbie when it comes to REI. I am currently focusing on saving up at least 3.5% down for this first property. I plan on house hacking this rental property (and live out of it for at least a year).

I listened to @Craig Curelop (guess I wasn't able to tag him) BiggerPockets Episode 252 about House Hacking and was immediately hooked. I intend to buy his book on "The House Hacking Strategy".  I am really intrigued about this concept and thought it would be a perfect fit for my situation as I move into the Denver Market. I am currently looking at properties that I can maximize this house hacking concept and either eliminate my rental/mortgage expense entirely and/or produce some sort of positive cashflow.

I am open to any ideas or further thoughts/comments to help facilitate a discussion. I will happily include a deeper background of myself if warranted as I am trying to make the right connections when I get out into this vastly growing market. As I previously stated, I am not able to get out into the Denver market until my lease is up with my current living situation (ending in June 2021). After listening to @Craig Curelop's BiggerPockets Podcast, the two things to get started in House Hacking is to search for lenders and real estate agents in that area, and that is the next thing on my list.

Linda Weygant · Answer

Tagging @Craig Curelop for you.  (You have to be connected on BP to tag somebody who isn't participating in the current thread)

I gotta tell you, I'm a huge fan of Craig.  While I'm sure he's not the first person to house hack, he's the first person I ever spoke with who did it in such an extreme manner.  His absolute dedication to his financial goals and then his ability to be able to monetize just about every asset in his life was startling to me.

I applaud your goals as well.  Saving up the down payment and going into a property with the future in mind is ideal.  I think the main reason I see people failing in their financial goals is that they either lose sight of the long term in favor of short term pleasures, or they get hooked up with a romantic interest that doesn't share their goals in the slightest and draws them off course.

I'm also a firm believer in the concept that we don't live forever and it's important to reward yourself as well as allow for some pleasure in life. All work and no play... Being able to find a balance between saving and investing vs enjoying your life is key.

Ben Rhodin · Answer

Hi @Jordan Copeland! It is great that you are starting to plan your journey out here well before actually moving. It will help give you time to get acclimated with the areas and explore all the avenues that House Hacking has to offer. Like Baskin Robbins, there are a lot of flavors of house hacking to choose from, as I am sure you already know. It all depends on your goals and how quickly you want to be able to get to that magical "financial freedom." You could get a 6 bedroom house, rent out every single room, and live in the living room, and you would be able to cash flow pretty nicely. Or you could get a duplex and rent out the other half and live comfortably and only cover most of your mortgage.

That is your first step while you have this time before you move out here, is to really nail down what you want to accomplish and how much you are willing to sacrifice in order to get there. There is absolutely no problem cash flowing about your mortgage here in the Denver Metro Area, but you will have to make a few sacrifices to your own comfortability. I am not saying that you are going to have to live on the couch (while you could) but you might have to take the least appealing room, and live with 4-5 other people.

House Hacking is the ultimate start to your REI journey (wonder why everyone suggests it) you just have to figure out which flavor you want to choose!

Jordan Copeland · Answer

@Nick Giulioni and @Stuart Grazier thank you both for pushing how great House Hacking is to start your REI career. I’m sure it’s great for any phase of your REI career, but since I’m just starting out, that’s where I’ll focus!

Stuart, my current plan is to get out to Denver in June 2021 (after my current lease is up). I have already been in contact with a real estate agent and his trust lender in the area. I have been given access to the MLS in the Denver area and continue to get daily listings in the $450k-$500k price point. I have roughly 7 months until I embark on my REI journey in the Denver market. After talking with my agent/lender, I will be looking to get preapproved/making offers on SFH listings around the month of March. Giving me roughly 3 months to find and hopefully close on a property. Since I’m in this “lull” period, I am primarily focused on saving as much as I can for this down payment while analyzing potential listings through the MLS (and other sites like Zillow and Realtor). I’m trying to familiarize myself within the Denver area/market and get more comfortable running my own numbers on these listings. I’m also focused on growing that knowledge base and foundation for REI. I just finished Rich Dad Poor Dad and now I’m reading @Craig Curelop book on The House Hacking Strategy.

I also want to appreciate everyone coming to this post and offering up their two cents. It has been very helpful and learning from individuals that have already been in my shoes. So thank you!

Stuart Grazier · Answer

@Jordan Copeland I'll echo many of the others in this thread, but house-hacking is such an amazing way to start your investing runway! I started about the same age as you out in San Diego (a very expensive market) before house-hacking was even a coined phrase and it totaly changed the trajectory of my future. We even had a guy renting out our garage!! To be competitive on your offers in Denver, you'll definitely want to have all of your lending lined up in advance and be prequalified so you can make competitve offers. Happy to help in that arena as soon as you are ready.

Nick Giulioni · Answer

House hacking is one of the best wealth builders possible.

https://www.biggerpockets.com/...

Jordan Copeland · Answer

@John Mayer

I appreciate you breaking down those numbers for me. It's very helpful when looking into a home. I was currently estimating anywhere from $750-800 a room, but I believe an underestimate of $700/room would be a good rule of thumb! You have certainly hit a home run on those numbers for a 6 bed rental property. Those numbers are huge! How many bathrooms does this property have? I am always curious to see those metrics as well. Like what are people willing to live with/sacrifice. Of the books and podcasts I've read/listened too, I've seen 2 beds per bath as a good rule of thumb. What would you suggest? Ideally I would like to find a 5+bed/3+bath situation (if possible).

Side tangent: I was talking to a real estate agent buddy of mine looking in the Indianapolis area. He thought it was bizarre to look at house hacking as a feasible/cash flowing option to REI. I beg to differ after hearing all these various success stories within the Denver market. But his skepticism certainly brings fair points. He assumed that having 5-6 grown adults living under one roof would have some substantial wear and tear on a home over the longevity of its loan. Is that true? Do you see that with your current property?

I really appreciate all your advice/feedback. This has been very helpful for me and grasping ideas/thoughts from other individuals who are benefitting from House Hacking (especially in the Denver market).

John Mayer · Answer

@Jordan Copeland

Our home is in Barnum West. It’s an up and coming neighborhood about 10 min from downtown with a good inventory of affordable housing. There’s not many larger 5-6 bed homes there, but they occasionally pop up and can sometimes be a home run. Our home is larger and higher end, so as a result we are on the higher end for rents in our neighborhood. We charge 795 a room, and 825 for the larger bedroom. In all, we collect $4005 on a $2360 piti mortgage (including pmi).

Room rental rates surprisingly don’t vary as much from area to area, even when you get out into suburbs like Arvada, Lakewood, or Thornton. The range is anywhere from 650-900 all across the metro for a decent room. Just like you would run comps for the purchase of a home, the best way to find out rents in a particular neighborhood is to look on Facebook Marketplace and Craigslist at what similar homes are charging. A good general rule of thumb I used when looking for my house was to use $700/room as a quick and fast estimate to run numbers on a home. If it passes, it might merit doing some deeper analysis.

Jordan Copeland · Answer

@John Mayer thank you for the response and added feedback. I certainly agree with the price points of $450k-500k. I was originally looking in the price points from $400k-450k, but I recently got into contact with @Craig Curelop and he recommended that same price point you mentioned. I've started to look into this range for SFH. I would say to piggy back off what you said. I am focused on eliminating my student loan debt as that is one of my larger debts. I have landed a good engineering job that has allowed me to move to our Denver office (as I am currently in the Saint Paul office). I have established a decent credit at the age of 24 and am looking to continue to knock down my debt to improve that score.

If you don't mind me asking. Did you manage to find a 6 bed home near downtown Denver? And if so, what are you currently charging by the room? I am eagerly looking to dive into house hacking and buy my first home around June 2021. So understanding the typical rent prices for renting by the room in Denver could be very helpful to me.

John Mayer · Answer

Hey Jordan! Congrats on taking the dive. I’m about a year into my first househack and it’s been the best financial decision I’ve made in my life, no question.

Looking for a lender and an agent are great first steps. In my experience, I think the most important thing you can do to househack successfully in Denver is focus on improving your financial position. I would make it a primary goal to get approved for 450-500K.

This sounds like a lot, but with interest rates bottomed out, it’s very feasible, even for a single guy (I won’t lie, it’s a lot easier if you’re married). Eliminate your debt, improve your credit, and land a 60K salaried W2 job and, congrats! You just got approved for $2750 worth of monthly mortgage payments under an FHA program, AKA a half a million dollar mortgage.

And believe me, the difference between getting approved for 400K vs 500K is HUGE in Denver. My goal was to land a 6bed house close to downtown Denver to keep a healthy supply of tenants. I managed to find a smokin deal at 480K and it allowed me to net $1500+ in monthly cash flow while living comfortably in my own house and having 0 vacancy with long term tenants.

None of that would have been possible if I had I only been approved for 400K. Not to say that it’s impossible, but you won’t have nearly as many options and will likely have to make some pretty significant compromises.just some food for thought! Be happy to chat anytime if you’d like.

House Hacking in Denver, Colorado?

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