Denver Property - What would you do?

Question

Looking for some advice and hopefully some input from people with experience in the Denver area. We own a property just outside downtown Denver in the Sunnyside neighborhood. The home is an 850 square foot SFH that was built in the 40's. The location is wonderful but I hate the structure, which got me thinking about a scrape & build (since that's already happening so much in the area).

We rent the home for $1800/month but will up it to $2000/month in August when the current lease is up. Current loan on the property is $180K ($1050/mo). Current value of the property is $325K.

New construction duplex units in the general area (NW Denver) are selling for around $600K each. I'd love to scrape the current structure and build a duplex - all-in construction costs would run around $550K, sale of both units would bring in $1,200,000 revenue, paying off the current note would leave profit of $470K, and we'd net around $400K after broker fees and stuff.

The financials work. The issue I've discovered is that the lot is zoned U-SU (Urban, single unit). The property is literally 700 feet from the area of the neighborhood zoned U-TU (urban, two unit), with no visible difference between the two zones (other than the duplexes going up!).

Has anybody (in the area, preferably) ever dealt with potentially rezoning a single unit lot to a two unit lot? Might try redeveloping as a single unit but want to maximize with the duplex as you can imagine!

Theresa W. · Answer

I'll throw in my two cents here. Spot zoning is not often looked upon favorably, so it would be an uphill battle. You might expect to drop $2000, 6 months and have to offer decent argument that a duplex rezone is consistent with the neighborhood plan or that there's a new community need to increase the density. 6,050 indicates it's a legal, non-conforming (undersized) lot - it still meets the minimum lot area for TU but do you have 50' of frontage? If not, it means a variance on top of the rezoning. In addition, your neighbors are going to have an opinion. If you can get a good chunk of your neighbors to support it, Denver might look favorably on absorbing a larger number of lots into the U-TU-C nearby, but that's a lot of neighbors that you'd need on your side.

From a planning perspective, the original plat for the neighborhood shows the typical lot sizes as 50'x125' and the TU zone lots were originally platted as 25'x125' lots. It's worth a face-to-face conversation with a city planner as to whether or not they'd even consider supporting your request. Without staff support, the zone hearings could be a bit difficult to get approval.

From a planning perspective, the original plat for the neighborhood shows the typical lot sizes as 50'x125' and the TU zone lots were originally platted as 25'x125' lots.  It's worth a face-to-face conversation with a city planner as to whether or not they'd even consider supporting your request. Without staff support, the zone hearings could be a bit difficult to get approval.

Austin Snow · Answer

@Theresa Worsham Thanks for the thoughts. The measurements work out, as there is sufficient width in the lot while maintaining the standard setback distance on the block. Having the city change the entire block to match the nearby U-TU is a good idea - I'll have to think about that more as a plan B.

@Brad Saari I just emailed our city council rep (Espinoza) and asked some general questions about the issue. A builder I spoke to, GJ Gardner, mentioned that Espinoza isn't particularly friendly to redevelopments, but I'll report back what he says.

@Tripp Howell I agree with your assessment - I'll likely keep it as a rental if I can't change the zoning somehow.

@Tyler Howell It IS very hot - we were lucky to have stumbled onto the home as a bank owned. I think the scrapes will be less common north of 44th because of the zoning. The profit potential on a SFH is still good but not like the two-unit potential. Why do you say you wouldn't try to re-zone? I'm not in a rush to build - I'd be happy to have renters in the unit for as long as it would take to potentially re-zone and then build. Win-win in that case.

Tyler Howell · Answer

@Austin Snow Sunnyside is getting very hot, feeling the heat bleed northward from Highlands. I live in Midtown (67th and Pecos) and Pecos in Sunnyside is already seeing a lot of renos. The scrapes will begin to venture north of 38th very soon. This a great area - personally I wouldn't waste a year with a zoning battle.

Tripp Howell · Answer

Hey @Austin Snow, dealing with Denver to get a variance is a bit of a headache.  Never know till you try though.  I looked at some comps and it looks like 325k would be the very top the market will support.  If you built a nice SFH on the property, it could sell upwards of 750k.  Not sure if it would be worth it though, construction of a new SFH would probably be around 400k minimum.  And with the market in that neighborhood only supporting 750k, it's pretty much a wash between selling now at 325k or a new build for 750k.  And you'd have to take out the loss of cash flow from not renting it out during the months it'll take to build.  The risk you'd have probably doesn't outweigh the benefit.  Unless you can get the city to okay a variance to build a duplex, I'd say you're better off keeping it as a rental, or selling it as is.

Brad Saari · Answer

@Austin Snow

Oh the joys of Denver zoning....if you go the route of asking for a variance please report back on your experience....I always just assumed I was locked into whatever the 2010 rezoning allowed for. Thus I've only bought TU, RH, MU, RO, etc

Austin Snow · Answer

It's 6050.

Where do you come up with the 6250 number? The area to the south that I referred to are coded U-TU-C --> Urban - Two Unit - C (5,500 sq ft minimum zone lot size). Like I said, most of the neighborhood looks the same (as far as lot size/configuration) and you'd never know that there was different zoning.

Travis Sperr · Answer

What size is the lot? If less than 6250 it probably wont work - but you can apply for a variance with little time and cost.

Denver Property - What would you do?

Most Popular Reply