Looking to Move to Denver-considering options for how to do it...
Louisville, KY · Member since 2018 · 6 posts · 5 votes
Looking to Move to Denver-considering options for how to do it...
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James CarlsonBusiness Member
Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votesQuote from @Mark Singleton:
Hello! My wife and I are looking to move to Denver in the next couple of years. Being motivated by Brandon Tu....
Just commenting on one aspect of your post. You mentioned a few times wanting to be able to Airbnb your Denver home after you move out. Be aware that the actual city of Denver doesn't allow you to operate a short term rental unless it's your primary residence. So if you want to STR your place after departing, you'll need to look in one of the few Denver-area cities that allow for non-owner occupied short-term rentals. Arvada allows for it. So does Wheat Ridge. As does Centennial and soon Adams County.
You can also live in a smaller place in Denver, maybe even a condo, and then turn that into a furnished medium-term rental after you leave. Any rental 30-day plus is considered a long-term rental in the eyes of the city and not subject to its Airbnb rules.
I wish you luck.
16 Replies
- Realtor · OK · Member since 2020 · 138 posts · 165 votes4y
@Jamie Salyer Can probably get you the answer you need!
- Real Estate Broker · Member since 2021 · 60 posts · 19 votes4y
Quote from @Kevin Pillow:
@Jamie Salyer Can probably get you the answer you need!
Thanks Kevin!!!
Mark, I'd love to talk to you about the Colorado market. I live and work in the resort community of Vail now, but I know the Denver market too. Feel free to reach out.
- 4yCliff BennerBusiness MemberAccountant · Denver, CO · Member since 2020 · 392 posts · 183 votes
@Jon Hill specializes in House Hacking here in the Denver and out areas, he could help you with how you could do that here and what areas may be better then others. I believe he did 3 house hacks here over the years, and has helped clients and tenants do the same thing here.
Benner Stride52 Reviews - 4yBonnie Griffin KaakePro MemberReal Estate Consultant · Denver, CO · Member since 2021 · 661 posts · 389 votes
Quote from @Mark Singleton:
Hello! My wife and I are looking to move to Denver in the next couple of years. Being motivated by Brandon Turner moving to Hawaii, we want to live somewhere beautiful with mountains. We'd live there for 1-2 years and then move back to our hometown but want to keep a place in Colorado. We own a couple long term rentals in our hometown. I know RE in Denver is really high. Our biggest question marks are financing. Here are options we are weighing with how to do it:
1. Buying a home with an FHA loan (3.5% down). And then after 1-2 years, moving out and renting it as an airbnb. I don't know if this can work. That's why I'm asking.
2. Buying a property with a couple units on it that we can rent out to offset the mortgage. And then renting our unit out after we leave CO.
3. Renting a place. We don't want to do this not only because we enjoy owning but we'd like to buy in a more expensive market like CO so we can get some of that appreciation.
4. Buying a regular home in a low income community with a conventional mortgage and trying to turn it into a short term rental after we leave.
I need some help from some Colorado people. I'm from KY and have no idea how I can do this.Hi Mark, My recommendation would be #1 or #2. These are going to be your best ROI. Yes, you can live in a place and then turn it into a rental at some point in the future. At the point you turn it into a rental or advertise it for rent, it is considered "occupied" and you can do a cost segregation study on the property for the wonderful tax benefits and extra cash flow.
Be sure to check for the ability to do a STR in the location you are choosing. Some areas do not allow them at all and others welcome them (think ski areas). Depending on your cash flow, in some of the mountain towns or downtown Denver area, the cost of property is very high and may or may not cash flow for you. Do your homework. Good STRs are usually in better neighborhoods and will have higher price tags. Be also aware of the land value attached to the property. This can have a big effect on your taxes and ability to accelerate depreciation. I am here if you need more guidance. I am in Denver Metro and work with CPAs/tax professionals, RE agents, and investors all over the country as well.
- Louisville, KY · Member since 2018 · 6 posts · 5 votes4y
Thank you! I'd want to live driving distance to Denver. There's a chance I could work in Denver. We're really just looking at options and weighing out the area's around Denver. One big thing is we want to walk out our house and either see mountains or be close.
Obviously we aren't buying right now, BUT we want to get an idea of area's we could move to, kind of financing we could utilize and really figure out the road map so when the time comes, we talk to an all star realtor and find the perfect purchase for that moment. Also by making a plan now, we can reverse engineer a map to get there.
I'd appreciate any help in the process.
A little background, we do urban ministry in Louisville Ky. We are used to living in a low income community. While we wouldn't want a fixer upper, we love finding a diamond in the rough(a good home in a less desirable neighborhood). So that opens some options. It doesn't mean we need to be in a low income community but we are comfortable in most places. - Louisville, KY · Member since 2018 · 6 posts · 5 votes4y
Quote from @Bonnie Griffin Kaake:
Quote from @Mark Singleton:
Hello! My wife and I are looking to move to Denver in the next couple of years. Being motivated by Brandon Turner moving to Hawaii, we want to live somewhere beautiful with mountains. We'd live there for 1-2 years and then move back to our hometown but want to keep a place in Colorado. We own a couple long term rentals in our hometown. I know RE in Denver is really high. Our biggest question marks are financing. Here are options we are weighing with how to do it:
1. Buying a home with an FHA loan (3.5% down). And then after 1-2 years, moving out and renting it as an airbnb. I don't know if this can work. That's why I'm asking.
2. Buying a property with a couple units on it that we can rent out to offset the mortgage. And then renting our unit out after we leave CO.
3. Renting a place. We don't want to do this not only because we enjoy owning but we'd like to buy in a more expensive market like CO so we can get some of that appreciation.
4. Buying a regular home in a low income community with a conventional mortgage and trying to turn it into a short term rental after we leave.
I need some help from some Colorado people. I'm from KY and have no idea how I can do this.Hi Mark, My recommendation would be #1 or #2. These are going to be your best ROI. Yes, you can live in a place and then turn it into a rental at some point in the future. At the point you turn it into a rental or advertise it for rent, it is considered "occupied" and you can do a cost segregation study on the property for the wonderful tax benefits and extra cash flow.
Be sure to check for the ability to do a STR in the location you are choosing. Some areas do not allow them at all and others welcome them (think ski areas). Depending on your cash flow, in some of the mountain towns or downtown Denver area, the cost of property is very high and may or may not cash flow for you. Do your homework. Good STRs are usually in better neighborhoods and will have higher price tags. Be also aware of the land value attached to the property. This can have a big effect on your taxes and ability to accelerate depreciation. I am here if you need more guidance. I am in Denver Metro and work with CPAs/tax professionals, RE agents, and investors all over the country as well.
Hello Bonnie! Wow! Thank you!
Would I be able to buy a home using an FHA loan and then convert it to a short term rental after a year? Are there any laws in the Denver area for short term rentals that would prohibit it? With an FHA loan can I do what I want with it after a year? - 4yJames CarlsonBusiness MemberReal Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votesA premature welcome to Denver. Come on in. The water's warm. Close to the mountains, 300 days of sun, good culture, and a great food scene.
Quote from @Mark Singleton:
Hello! My wife and I are looking to move to Denver in the next couple of years. Being motivated by Brandon Tu....
Just commenting on one aspect of your post. You mentioned a few times wanting to be able to Airbnb your Denver home after you move out. Be aware that the actual city of Denver doesn't allow you to operate a short term rental unless it's your primary residence. So if you want to STR your place after departing, you'll need to look in one of the few Denver-area cities that allow for non-owner occupied short-term rentals. Arvada allows for it. So does Wheat Ridge. As does Centennial and soon Adams County.
You can also live in a smaller place in Denver, maybe even a condo, and then turn that into a furnished medium-term rental after you leave. Any rental 30-day plus is considered a long-term rental in the eyes of the city and not subject to its Airbnb rules.
I wish you luck. - 4yJames CarlsonBusiness MemberReal Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
Quote from @Mark Singleton:
Hello! My wife and I are looking to move to Denver in the next couple of years. Being motivated by Brandon Turner moving ...
Oh, also, if you plan to definitely only stay in Denver for one year, that's one thing. If you think you'll stay for a little over a year or even close to two years, then just make it a full two years. If you make it your primary residence for two years, then you have the option -- if you wanted it -- to sell after five years of ownership and not owe capital gains taxes.
Now maybe you are sure that you'll want to keep it for longer than five years. If so, it doesn't really matter if you live in it for two years, but it's something to consider.
- Louisville, KY · Member since 2018 · 6 posts · 5 votes4y
Thank you so much! That's extremely helpful. That's the kind of information I'm needing to explore right now so I can position myself to make the right purchase. Those area's are really close to downtown. I'd even be fine being closer to the mountains if need be. I could drive 45 minutes to work in downtown Denver if needed.
I'll have my wife and 3 kids with me so I'll need a decent sized place.
Do you think that a furnished 30 day rental condo or house would do well in Denver? Would I utilize airbnb or just have it managed like a long term rental? - 4yBonnie Griffin KaakePro MemberReal Estate Consultant · Denver, CO · Member since 2021 · 661 posts · 389 votes
@Mark SingletonYou can believe almost everything @James Carlson tells you EXCEPT...Don't believe him for a minute about the water being warm! ;-)
Renting out condos or houses for 30-days or more do well in Denver area, especially if they are near hospitals or universities.
As for where you would want to live, a nice decent-sized place for your family is going to be a lot more expensive than living in KY. Get yourself a good RE Broker/Agent and plan on spending a lot of time looking. Although, there are more places available now than there were 6 months ago.
- 4ySeth WilcockBusiness MemberLender · Nashville, IN · Member since 2016 · 138 posts · 84 votes
Hi @Mark Singleton,
Great questions! Welcome to Denver if you decide to make the move out.
1. You can buy a 1-4 unit property with an FHA loan and put as little as 3.5% down. To meet the primary residence definition, you must have the intent to occupy the home for 12 months past the date of closing. After the 12 months, you can do whatever you want (convert to a rental, etc). That being said, the city & county of Denver has rules/regulations about short-term rentals. You would only be able to do a short-term rental in Denver if the property is also your primary residence. The city & county of Denver doesn't allow short-term rentals on pure investment properties. You would (however) be able to occupy for a year and do short-term rentals during that time in which you occupy. If you decide to move out after 1 year, you would then have to do long-term rentals instead of short-term rentals.
2. If you bought multi-family (2-4 units), you can use net rental income on the unoccupied units to qualify for the mortgage payment. The net rental income would work out to be 75% of the gross rent as determined by the appraiser after you're under contract. The gross rent would be based on long-term fair market rent, not short-term rental income. You can do this on FHA or conventional financing, and the property doesn't need to be rented prior to close in order to use net rental income to qualify.
3. I don't recommend renting right now either. Renters are getting pummeled by rent increases right now. It's expensive to buy, but renting is no picnic either. Some renters saw as much as 50% rent increases last year.
4. Again, double check the short-term rental laws depending on where you're looking to buy. Adams county may be a little bit more flexible on short-term rentals, but it's been a few years since I last checked the rules and things may have changed. If you're dead set on converting to a short-term rental later on down the road, your first step would be to double check the short-term rental laws. Once you have an area identified, you can do as little as 3.5% down on FHA, 0% down VA, and possibly as little as 5% down conventional on 2-4 unit properties (qualifying ability would need to be determined by the lender). It would also be important to recognize that municipalities may change their stance on short-term rentals after the first year as well, so be aware that the rules could change. If you're not going to occupy the home, you would need at least 15% down for a 1 unit property, or 25% down on 2-4 unit properties. If you will occupy the home for "some portion of the year", then you might be able to structure the deal with as little as 10% down (1 unit only), but the area/scenario would need to make sense as well. Most underwriter's won't approve the deal as a 2nd home purchase if it's in Denver-metro since the city wouldn't really be located in a "resort-type area". If it's in the city, there would need to be a different reason (e.g. traveling there for work from time to time, or to visit family when you're in town).
If you're looking for short-term rentals, the most friendly markets that come to mind off the top of my head are Grand county & park county. These areas are "resort-type" areas and would likely be fine for 2nd home financing with 10% down.
- Real Estate Broker · Medford, NJ · Member since 2018 · 236 posts · 177 votes4y
@Mark Singleton It may not be possible to do STR with FHA, you could refi later and then do that, but most FHA loan packets I see clearly state no short term rentals. I'm not sure if this is something new within the last few years or not but I believe the last one I saw said nothing under 30 days. Good luck, Colorado is an amazing place.
- Louisville, KY · Member since 2018 · 6 posts · 5 votes4y
Quote from @Michael Brattelli:
@Mark Singleton It may not be possible to do STR with FHA, you could refi later and then do that, but most FHA loan packets I see clearly state no short term rentals. I'm not sure if this is something new within the last few years or not but I believe the last one I saw said nothing under 30 days. Good luck, Colorado is an amazing place.
Thanks! That's something I'll have to see on. But I guess depending on the market at that time, I could refinance it after the year is up and turn it into a STR. Or like someone said, maybe I could just turn it into a Medium term rental(30ish days).
Thanks for the good input! This has all been really helpful. A few hours in the forums today and I'm several steps ahead now. - 4yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
We got mountains in Idaho. Lakes too...
- Real Estate Broker · Medford, NJ · Member since 2018 · 236 posts · 177 votes4y
@Mark Singleton MTR or LTR would work in the beginning and then a refi to go STR. You can ask your lender the wording in the packet ahead of time, otherwise you wouldn't see that until settlement. Good luck on your journey!
- House Hacking Specialist · Denver, CO · Member since 2016 · 411 posts · 396 votes4y
@Mark Singleton, Jumping in late to the party. One thing to keep in mind is to focus on the numbers after you move out, not necessarily while living there. You are buying this property as an investment so the 5-10 years you own it as a rental are much more important then the 1-2 while living there.
I guess I should have said this first but my vote is #2. Buy a SFH with some sort of separate income suite to rent out to offset your mortgage while living there. After moving out you have a couple different options, (all depending on city rules and regs), STR, MTR, LTR, rent by the room, or a mixture of the 2.
We just recently published a YouTube series with BiggerPockets called House Hackerz (link to series here) where we tour local house hacks (think of it as the MTV cribs version of Colorado House Hacks). This will help give you a good visual of what to expect.
Best of luck!
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