Newbie- Buy and hold in Denver or out-of-state?

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HI @Andrew Dincola! You are a ways ahead of being a newbie I would say. Though you may be a newbie in property count, you definitely have a defined vision and goal that you want to achieve! This is the #1 thing I suggest anyone tackle before getting into investing. Now it is just figuring out how to best achieve this goal of $3k a month for you.I agree with what David said above me, but I believe you can get to the goal that you have in mind sooner, and easier than you believe. If FI is your goal, and you want to achieve this ASAP, I would suggest you continue house hacking here in Denver each and every year. If you are not worried about loosing some comfort, I would suggest sticking to rent by the room, and really supercharge your FI.If you qualify for a traditional mortgage, and you are able to acquire a 5-6 bedroom home here in the Denver area for between 450-500k (with the current prices of homes) then by renting out the other 4-5 rooms that you and the GF don't occupy, you will be able to live for free, and producing cashflow. An average room in Denver goes for about $700 a month (some for more) so if you rent 4-5 you'll be looking at around 2800-3500 a month in rental income (while you live there, adding 700 when you move out). It is not unheard of for my clients to be making $1000 on top of their mortgage while they occupy the home, and are living for free. So with that you would just need to buy one of these properties every year for the next 3 years and you'll hit your goal. But remember, you are also living for free, and can accelerate your savings rate. So the way I suggest people strategize is after they get into their first house hack, begin saving for the next DP (about 25k for an average home here), then when you have that saved the rest of the year you can put the extra savings towards other investments like out of state. If you can purchase 1 house hack, and 1 out of state investment each year that would get you to your goal in no time (relatively speaking). I would agree that you should keep your current place, if its able to cashflow as a rental, and you may be able to pull out the equity in other ways. But if you need to sell off that property in order to get into a more optimized property (whether because you can't qualify or whatever the reason), then I would say go for it. I would also say that while the small multifamily is the traditional way to go for a house hack, it is not the best way here in Denver. Our small multifamily properties tend to be old, torn, and over priced, there are other ways to achieve the multifamily feel of a house hack, without paying that high price tag. Say renting out a finished basement unit in a single-family.Finally, as I realize I've been ranting for a while now. While the BRRRR strategy is great, and everyone wants to utilize it, it does come with the some drawbacks. The biggest one you already pointed out... If you are BRRRing then you sacrifice cashflow in order to pull your money back out, so you need more properties in order to achieve the same amount of cashflow. The other issue is that BRRRR is usually more suited for lower price areas, like the mid west, as adding 20% in value is much easier on a 50k property, than it is on a 500k property. So unless you get really good at finding off market properties here in Denver, a full BRRRR is probably going to be tough. But if you change your mindset, and are up for sacrificing some short term comfort for long term gain you can very quickly achieve your goal without having to acquire 20 properties.There are also multitudes of other house hack strategies that work well here, and I'm more than happy to help you find the best pass to your goal!

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Hi Andrew! Looks like you are building momentum in the right direction. I too live and invest in Denver and at times question is purchasing out of state a good option. I however think the best asset and thing you have that separates you from other investors is you local market knowledge. You know the area! Sounds like you have good skills to help rehab and good connections with fellow rehabbers and potentially future partners. Perhaps the best way to grow a portfolio without a ton of income is to continue your househacking method. Maybe you pull a HELOC on your current home or a cashout refinance with rates being so low and get some equity out that allows you to buy your next home. I'd consider pulling the cash out of the current home and then keeping it as a rental as a low cost way to immediately have one income producing rental and then house hack your next purchase, wether that be a duplex, basement or rent by the room scenario. If you really are trying to boost cashflow consider continuing a rent by the room scenario on the home you depart, this will be the best approach to get the most cashflow and improve your DTI (most lenders will count 75% of your rental income as income in DTI)Pulling a full BRRR in Denver is tough, but even getting 50-60% of your money out on BRRR is beneficial here. I say be creative, leverage you relationships to help secure loans, maximize your rehab ability and consider where you fall on the comfort vs. profitability scale and go for it here in Denver! If you can hustle to find a way to make things cashflow you can know you're in a market where the appreciation is better than any affordable out of state markets.Good luck my man!

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@Andrew Dincola Yeah man I think you are 100% on the right path and you've got some good knowledge. May be worth talking with a strong lender who can help think of creative ways to keep it all going! Got lots of moving parts in this one, but I like you're just keeping options open, willing to get creative and find a way to hang on to as much equity as possible!

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@Ben Rhodin I appreciate you taking the time to give a thoughtful response here. What I’m getting from this is that it’s not unreasonable to focus my efforts here and find creative ways to achieve financial independence in my expensive market. I do think that hacking my way there is a viable option, and though qualifying for conventional mortgages large enough to exercise some of these methods in this market seems to be the hurdle my financial situation is facing, it’s worth it to make that jump in this location. Please note my response to @David Williams above. In regards to coming up with ways to keep both of the two properties currently in our hands here, do you have any suggestions I may not be considering?Once again, I appreciate your wise advice and the time you’re taking to give me a valuable response!

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@David Williams Solid advice! A piece of information I’ve left out that will play a huge roll in how I carry forward with our current properties is that my sister is considering moving out of state, location TBD, but leaning towards Florida. While she’d likely rent for the first year to test the waters before committing to a new homestead, she wants to pay down her current debts immediately, produce some cash to cover moving expenses, and maximize her purchasing capabilities by the time she’s ready to purchase after that first year. Again, she’s on the mortgage on her house, which was purchased in March of 2020. If we can only keep one I’d keep the one she’s in because mine is sitting on equity, appreciation forced through upgrades I’ve made, AND has been owner occupied for 2 of the last 5 years. That would mean my girlfriend and I would move into the other one, and either she and I, or Sister’s husband and I take over the mortgage to free Sister up. It’s larger and has more rooms, therefore better hacking potential. Back to my conventional loan qualification dilemma- I don’t currently know of a route that would provide my sister with her needs, yet keep both properties in our possession to be rented out. Perhaps you, or anyone reading this, might have some suggestions there?Otherwise I think the move is to profit from the 1st house sale (50-50 split), move into 2nd house with a refinanced mortgage to rent by the room ISO free (or at least cheap) cost of living, and hunting for a mother-in-law or other ADU capable property to hack next- utilizing the proceeds from that sale towards the purchase. Thoughts?I appreciate your input and educated advice. I think it’s very wise. I like the idea of sticking around here in a positively appreciating market that I’ve already got roots and an understanding of. I think it’s clear that I just need to keep on my toes and get creative!