Denver accessory dwelling unit properties

[Kristofer Kersnick]

A real estate agent presented me with a pocket listing in Denver that is a single family home with an ADU. I am told that it can not be marketed as a duplex because it only has one address and only one water and gas meter. The ADU is the basement unit which has egress windows and a private entrance. The property is not in a prime location but I have reason to believe that the neighborhood is in the process of gentrification.

What signs do you look for in a neighborhood for gentrification and appreciation potential?

What is the process to get the city of Denver to recognize an ADU as a duplex? It is zoned for a two unit property (E-TU-C) and already has a full kitchen and laundry room. The only advice I can find is about permitting and building an ADU in Denver.

How do i appropriately price a property with an ADU?

I would love to find a real estate agent who specializes in ADUs so that I can see if this is a good deal and hopefully purchase more and convert them to a proper duplex.

[Matt M.]

Don't bother trying to say it's a duplex. You won't be able to split it since it's an up/down. I'm doing a new water line to a plex right now. It's $7k in Denver. Luckily there was already a line, or I'd be 2x as much. We are doing the street cut and everything. Best to leave everything as is and house hack it. 

You won't find an agent who specializes in ADUs. There isn't enough of them. There is a handful of homes on the market right now with ADUs. You could look at the zoning map to find where they are legal and then build one, but from what I've seen, the numbers don't pencil out when an ADU runs $200k+ to build.

Also, the place you are looking at could be marketed as a duplex if the zoning is correct. It has nothing to do with the gas/water situation. I bought 1/2 of a duplex and a full duplex in the past 8 months that had 1 water and 1 gas meter. 

For gentrification, look at past sales. Are any of them flips or remodels? A lot of us flippers are out the leading edge of gentrification. If you see an area where there are a lot of rehabs, odds are it's on the upswing.

Finally, about pocket listings. They are a disservice to the seller because they don't expose the home to the market. Agents doing this usually don't have a listing agreement or are trying to double end it to get the full commission. Have you run comps on this place? I'd recommend having someone pull some quick comps so you can make a fair offer.