Is it time to switch strategy in Denver market?

[Derek Howe]

Hello Bigger Pockets! My fiance and I have been living in our first property, a duplex in Lakewood for almost 2 years now and are ready for the next move. Our current strategy has more or less been the BRRRR method, look for a duplex-quad, or possibly SFH, use owner occupied financing, fix it up and move on. At this point, we have a large chunk of cash, good credit and solid incomes from work plus the duplex. However, I just can't seem to get any of the multi-family units we've been looking at to pencil with any kind of cash flow cushion. Cash flow is not the primary motive in this case, but I look for it to provide a buffer for unforeseen events, rent compression, etc. I'm now looking at SFH as we'd be ok living in one for a few years while the market settles and we start a family, but not having a ton of luck there either. We all know how hot the Denver market is, so my long-winded question is: is it time I change up my strategy? We don't need to move, although I would like to. Should we continue to stockpile cash and wait? Start working with wholesalers & hard money? Look out of market? I am honestly stumped and feeling a bit frustrated. Thanks in advance to all that take the time to offer advice!

[Jeff White]

@Derek Howe I wouldn't give up on your goal, you are just going to have to adapt. Denver is a great market, and it will cool down again. Competition is tough right now due to lack of inventory and low rates, but there are still people buying houses with owner-occupied financing in Denver metro, you just have to be patient as more inventory comes on the market in the next 3-6 months.

I'm the same way, I like to invest in my backyard of Denver, and based on the metrics, Denver is a solid long-term appreciation market. 

Have you thought of single family properties with separate entrances?  Or, a single family property that you can add a separate entrance? There are a lot more of those on the market than just pure multifamilies and a lot of them are in better condition too since more owners occupy them.

Also, you get great owner-occupied financing too with the lowest rates for single families. 

The benefits of single family properties with separate entrances are the multiple strategies that you can employ.  

1) If you and your wife want to maximize cash flow and make money while living there, rent by room is an great option.

2) If you want to just have a steady tenant that covers 50-75% of your mortgage, you can live upstairs and rent out the downstairs to a separate tenant.

3) If you want to not deal with tenants but want to maximize cash flow in spring and summer, furnish the basement apartment and Airbnb it for 6-8 months.

4) Another option is to rent as a medium-term rental, it is between a long-term tenant and Airbnb for rental income, these types of tenants are travel nurses and corporate people usually on contract for a 3-6 months. 

You can also combine these strategies to suit you and your wife's needs. Example, Airbnb in spring and summer and long-term tenant in the winter months.

You can still cash flow in the Denver market, just need to be a little more creative, and you will get that appreciation as well.