Is this the Ultimate Colorado House Hack Idea in 2024?

[Scott Trench]

I was recently talking to a graduate of one of the military academies who will be moving to the Denver/Aurora area at the end of this year. We were brainstorming house-hack ideas. We arrived at this as the hypothesis: 

- Look for a 4-5 bedroom single family home, or a large duplex - 4-5 bedrooms. 

- Look for properties for sale with assumable mortgages in that area. There are multiple properties that are listed that can be purchased with less than $50K in cash, with assumable mortgages, in the 4-5 bedroom range, for less than $550K. 

- Look for properties with a large backyard and/or detached garage that would work well with an ADU and learn the ins and outs of the new CO laws that essentially have rezone most of the state to require approval for new ADU construction.

- Underwrite the property to breakeven or small positive cash flow as a standalone long-term rental to a single tenant. This must produce positive cash flow to protect downside. 

- Understand the upside of the "rent by the room" strategy

- Understand the upside of any repairs that can be made to the main unit. 

- Understand the cost/value of completing an ADU project

- Underwrite mid-term and short-term upside cases as well. 

I believe that this approach minimizes downside by exploring the numerous currently for sale opportunities with assumable mortgages. That it has a strong "base case" cash flow from the house-hack, and that it has multiple avenues for material upside, combinining live in flip and house-hack concepts. 

I further believe (though would not underwrite to this) that this approach would offer the buyer the potential opportunity at a future date to conceivably subdivide the parcel and sell the main unit and ADU as separate properties. That is speculation, but I believe the law will tend towards allowing that kind of outcome in future years.

What do you guys think? Practical? Feasible? Worth exploring?