House Hacking - What City to Start?

Question

Hi BP!

First time posting here. My wife and I are wanting to start our real-estate investment journey with a house hack. We are located in Denver, CO. Housing prices here are getting ridiculous and we are having trouble getting approved for an FHA loan. We are willing to relocate out of state. But we aren't sure what cities have good rental rates and that have reasonable housing prices.

Thanks!

Neal & Alex

Jeff White · Answer

@Neal Ichinohe I can totally understand where you are coming from when you see the prices for the average single family homes out here!Denver has gotten a little crazy, but there are lots of ways to make it work. It is a a question your comfortability. I've done everything from rent by room, multifamily, normal rental units, etc. House hacking is basically just reducing your living costs with the goal of living for free, but that's not always the case. There are still ways to make it work in the Denver market without paying a huge premium, have you thought about a townhouse or condo? The most important thing is not to hit a homerun on your first deal, but just get started.Once I did my first house hack, it allowed me to learn and grow and invest, and then, I purchased my next one only one year later.

James Carlson · Answer

@Neal IchinoheWell, you have ample opportunities in your backyard. I've had clients successfully house hack in Denver areas as diverse as Barnum, to east Aurora, to Westminster.But if the entry point is worrying you, what about Colorado Springs? It's not cheap, but it's at least more affordable. We're way closer to the mountains. The downtown development and other changes like an Amazon facility demonstrate the long-term viability of this place. And you have a ton of people moving here, many of whom want a room to rent. So if you're looking to stay in Colorado and house hack at a slightly lower price point, Colorado Springs might be an option.

Ben Rhodin · Answer

Hi @Neal Ichinohe ! I'm going to agree with Grace and Jeff who posted before me. Have you talked to multiple lenders here in Denver? As some are more creative and more willing to work with you than some of say the bigger national banks are. Is the issue being approved at all, or being approved for the amount you were hoping for? If you don't mind me asking. If it is the latter, I would talk about your goals with House Hacking, and how much comfortability you are willing to sacrifice, as Jeff said. There is a whole array of options for house hacks, and it's not about hitting a home run on the first one, but getting started and gaining the experience. Even if you have to start with something smaller like a condo or townhome, that you just rent a bedroom short term, midterm, or longterm, you are still moving down the field of investing. Then you can free up some time and money from offsetting your living cost, and save more for the next property. It's about getting that momentum started, and building up speed. The first one is always going to be the trickiest and most intimidating.

Grace Wang · Answer

hey @Neal Ichinohe have you guys talked to multiple lenders? Some lenders may have more programs that fit your situation

Chris Davidson · Answer

@Neal Ichinohe I'd start with finding the city you want to live in. But if you are wanting out of Denver for the prices bit still like the Denver field check out Boise.

James Beckman · Answer

I currently live in Longmont and will second what @Garrett Jordan said - I love it here, it is far more affordable than Denver or Boulder, and I love the quality of life. The ADU regulations were recently changed to be more lenient, which opens up your options. Check out Longmont

Brynn R. · Answer

@Neal Ichinohe have you looked into taking a loan from your 401k? If you are still employed and still at the company where you contribute, you can take a sizable loan from it. Depending on your plan, some plans even allow you to continue to contribute while repaying back the loan. This might help you get the amount needed for the down or liquid reserves up.

Garrett Jordan · Answer

You are right that the cost of entry around Denver is high, however @James Carlson is right. It is definitely doable in your own backyard. James' list is great, I'd throw Thornton and Longmont on that list. I know a couple of people that have had recent success house hacking in Longmont with a mother in law suite in the basement.

Michael Bennett · Answer

Check out chfainfo.com, if you qualify you can get a downpayment assistance grant!

Neal Ichinohe · Answer

Thanks everyone! I wasn't expecting this much support. To answer some your follow up questions, we aren't getting approved for the amount we are seeking. Which has been around $500,000. Part of the problem is that even with 3.5% down along with closing costs, at that amount, is above our current savings. thanks!