Denver Under Contract on Triplex! Referrals and advise welcome.

[Michael C.]

Sometimes life is crazy with how fast things happen!

Literally looked at our first unit in person, been watching the market/mls for alittle while, this one looked interesting and I like the area so we went and looked at it with listing agent. Owner was present we talked for a bit he liked us. Well now we are under contract for $120k under list price. It needs work and will be a live in BRRRR.

I didn’t have my whole team built yet so looking for some help. 
1. Can anyone recommend a good property inspector for an older home?

2. Anyone local do VA rehab loans? Is that still a thing? Or any other good lenders? Currently started working with first bank.
Trying to explore my options, but the property needs work so I don’t think VA or fha will work. Only rehab, 203k, or conventional (I can put 25% or more down but don’t want to if I don’t have to). 

3. Any other recommendations for a newbie?

[Michael C.]

@James Carlson

I think you are wrong. per the link you sited-
"Each unit in a duplex is a separate primary dwelling unit, so the primary resident of each unit may obtain a license to conduct an STR. However, a person who resides in one duplex unit may not obtain a license to conduct an STR in the adjacent unit, because that unit is not their primary residence."

The duplex has 2 addresses. If one is my primary and one is my wife's primary we could still live on the property in 3rd unit (with no legal address) and have 2 STR's.
There would only be one rental contract per property at a time because it has 2 house numbers. The 2 contracts have different addresses. 

[Drew Fein]

@Michael C. Actually, @James Carlson is spot on! James and Erin are THE experts on STRs in Denver.  We've seen what happens when spouses, who actually live together, claim to have separate primary residences:  https://www.denverpost.com/201.... Of course, if you're actually living separately, then that's a different story, but you still couldn't live in the third unit and STR the other two.

[James Carlson]

@Michael C.

Maybe I'm not totally clear on what you're looking to do. I've seen that listing. (Great potential, by the way, facing the gulch.) So it's currently a duplex, but it could be four units? I see it's listed as "apartment" on the tax site. If I understand what you intend to do, I think you're half right and half wrong.

If this is considered a duplex, and you claim one side as your primary residence and your wife claims the other side as her primary residence, and each side has a basement unit that is not a legal separate unit, then yes, you each could rent the downstairs spaces. 

The bigger problem, however, is this: You both would have to actually live in those separate places. The city defines "primary residence" as where you live for 183 days/year. You're talking about each claiming one side as your primary residence when you would in reality be living together. 

The city knows about this strategy and is clear in how they view it: It violates the primary residence rule. See news stories about felony charges against people trying this ... here, here and here. (I personally like the latter story as I'm quoted in it and sound reasonably sane.)

I should say I'm not a lawyer and it's not a bad idea to consult one if you're worried about it. @Drew Fein is on here and knows her stuff.

[James Carlson]

Looks like my post and Drew's passed each other in the webspace. But yeah, what she said.

[Michael C.]

@James Carlson
Ok. Wow they take it more seriously than I thought. 
I would only STR while actually living there, once I move I would go long term.

Really good info thanks.  I think the big difference is these people actually had easily provable different primary Residence. If an investigator wants to come check it out, I will actually be the one answering the door when he knocks.

Also which tax site are you using to look up the property as an apartment?

[James Carlson]

@Michael C.

Yeah, Denver is -- for better or worse -- seen as a leader in enforcement of their Airbnb laws. You may be right about how it would work in your situation, but I think it's just good to know what the laws are. And I'd say that a solid investment strategy is one is sustainable. Not following the law creates some potential instability.

Also, I'd say it really comes down to your neighbors comfort. If they complain then you could have the city asking questions. And they have investigators who will look for any proof of your intention, including any forums where they might find you explaining what you planned to do. I know this because one of those felony charges I linked to was based -- at least in part -- on a video posted on YouTube by the accused talking about where they lived ... which was not the Airbnb.

[Michael C.]

Originally posted by @James Carlson:

@Michael C.

I see it's listed as "apartment" on the tax site. 

what site are you using?  Interested to see what you are looking at. When I look it up on Denvergov.org/property it shows duplex.

[James Carlson]

@Michael C.

@Bill S. may know better than me what these designations mean, but on the Realist tax site, found on our realtor's MLS site, its land use is listed as "apartment 2-8 units." On the Denver zoning map on the city's site, it lists the zone description as "multi-unit (MU, RH, RO)." See screenshots below.

[Michael C.]

Just a little update. All good news. 
1. $20k seller concession. 
2. emailing with the city it’s a legal triplex. Found some paperwork from zoning listing it that way in 1987 so they are going to change it officially and add the 3rd address. (Denver water also had it listed as a triplex)  Best part, this was all unintentional too. I was just asking questions and for Different records, they were like wait this doesn’t match. 

Should I tell the transaction broker it’s a legal triplex? Agent and the seller think it’s a duplex and never dig into it.  I guess I’m a little worried they will see $$$ with this info and could complicate or try to get out of the deal. 

but on the other hand the bank and appraiser need to know this to get the correct value and have the deed recorded right or the 3rd address won’t be recorded?

I’m not sure what do you all think??

[Matt M.]

Your bank will probably require more down if you tell them. You don't have to tell the broker or seller. It's really hard to get out of a deal here in Colorado if you are a seller. Actually, it's almost impossible. You should be fine with the appraiser assuming you have the comps. 

Also, did you lock in your rate yet? You can get a 30 year below 2.75% now. I'd shop it if you have time. 1stbank is EXPENSIVE. 

[Michael C.]

3.25% with first bank. It’s kind of expensive. 
why would they require more down?  Under 4 units is still residential loan not commercial.

Might be too late close in about 2 weeks.

[Michael C.]

Appraisal came in at purchase price. Is that normal or do you usually come in under appraisal?

I thought it was going to come in higher honestly. That was also apprising as a triplex with 2800sqft, not sure it would have made it as a duplex at 2100sqft from Denver record. maybe I shouldn’t have brought up the sqft discrepancy or my findings of it being a tri instead of duplex. With all that extra info it still just made it barely. 
Appraiser took $50,000 off all comps right off the bat for the condition this one was in (missing flooring, countertops, appliances from a started rehab) 

Or do appraisers just ‘try’ to come up with the value at purchase price to make seller, buyer and bank happy?

Luckily I am getting $20k concession so technically I’m under appraisal a bit just thought it would be higher. 

Edit- more info. 
out of 5 comps 2 duplexes and 3 tris

Adjusted sale price for comps- I’m lowest

Price per sqft- Unadjusted one was lower. Adjusted  I’m lowest.

Price per unit- unadjusted I’m lowest, adjusted I’m lowest.
price per bed- unadjusted one lower, adjusted 2 lower. 

[James Carlson]

@Michael C.

Appraisals can be all over the map and can depend on the appraiser. I've had appraisals for Denver investors come in $15k low, we contest it, and another appraiser comes in at value. They're human, and it is still a somewhat subjective process.

I wouldn't worry too much about it being lower than you thought. I'd say the majority of my buyers' appraisals come in right at value. (That's true for Denver and Colorado Springs buyers.) And it doesn't really mean anything for you. It's not like you can use that appraisal for anything. If you wanted to take a HELOC out or refinance soon, most banks and lenders will still require a new appraisal. So it's just good that it came in at value and didn't blow up your deal.

Congrats on getting through that step. 

[Michael C.]

I need windows! 
Any referrals?

I got 1 reasonable quote from 303 windows. Amerimax craftsman portrait series it’s there mid line vinyl window. Anyone familiar with that brand?  

[Richard Libutti]

@Michael C.

Great news on new property! I recommend Alex with Endeavor Exteriors for windows with a great range and competitive pricing/warranty etc. 

Best of luck!