Building a Duplex in Denver

[Kevin Brown]

I would like to get some feed back on my initial thoughts of getting into the real estate investment business specifically in the Denver metro area.

I would like to purchase a single family home, demo it and build a duplex, with the intent of living in one unit for a period of time. Long term I’d be looking to hold this property and repeat the process.

I currently have a full time job working in the construction industry managing large infrastructure projects, so I’d like to think that I could manage the construction outside of my full time job. Assuming I have access to the funds for a down payment on the single family home and 20% for a construction loan, would this be a good investment of my money or am I better off using it differently?

Obviously the initial purchase of the single family home and cost of construction has the biggest impact on the overall success of the investment but what other things should I be aware of?

[Jeff White]

@Kevin Brown I like the creative thinking, but that sounds like a huge process dealing with the city, purchasing a property cheap enough to make the numbers work, getting all the permits, construction delays, dealing with contractors when you work full-time, etc. Also, you would need to find a single family on a multifamily zoned lot too.  

The big questions to ask yourself: what are my goals? What will get me to accomplish my goals the fastest? 

Anyways, to me, it sounds like you want to house hack and do it a few times. That's great, and you don't have to go through the whole process of building a new duplex from the ground up, especially for your first deal.

Since you have a full-time job, why not maximize your cash on cash returns by implementing one of a few house hack strategies: 

1) Buy a large single family house with 5% down payment and rent each bedroom out - this is the best cash flow strategy in Denver right now. It requires more work, but well worth the returns!

2) Buy a 2-4 unit multifamily with FHA 3.5% down payment - this is a good strategy too, but they sell for premiums in Denver, and a lot of them need work.

3) Buy a house with 5% down payment with mother-in-law suite, basement apartment, ADU, addition, and live in one part and rent out/Airbnb the other part - this is a more creative way to get the best of both worlds without having to pay a premium for a multifamily. Usually, these are in better condition than multifamilies.

 4) Since you have enough for both a construction loan and a down payment, why not buy a house hack with 5% down and buy a investment property with 20% down payment. That way you get to maximize your returns and deploy your capital.