Moving into Denver Area - What Areas to Focus On?

Question

I'll be moving in June and hoping to house hack and then turn into a rental. Lots of neighborhoods, hoping someone can lend a hand with personal experience.

Ben Rhodin · Answer

Hi @Brandon Itkin!I don't see an issue with your budget of $450k. $450k is the sweet spot we use for our house hacking clients, we look for 4+ bedrooms where you can easily add one or two bedrooms. This usually ends up being a typical ranch home with a basement, which will usually have 3/1 upstairs, and depending on how the previous owners set up the basement a 2/1 downstairs. These homes are the typical "starter" home so they tend to get less competitive as they aren't as desirable as the more custom newer builds. These properties also lend themselves better for after you move out, as they are easily converted to a single-family with an in-law suite in the basement, so you can rent each floor as a separate unit, instead of the whole house as one. You will see roughly a 30-40% increase in rental income this way, over a typical single-family rental. As that is the issue with most single families here in Denver, that they don't cash flow as is. Having to rely on maintaining rent by the room can be challenging as well after you move out, because of the increased work it takes, and the lack of property managers that will handle it.I rarely have to get a client to go up to 500k unless they want the creme de la creme of homes, for a house hack. I think you are getting stuck on the bathrooms, as long as there is 1 bathroom for every 3 bedrooms you will be fine. You will rarely see a home with equal bathrooms to bedrooms, and will usually mean a very custom home, hence the price premium. Typically you will see 2 to 2.5 baths, one on each level, and maybe a master ensuite. Personally, I tend to steer people towards the north and west of Denver (Westminster, Arvada, Lakewood) as these areas are a bit more developed, and have good proximity for multitudes of tenants. They are typically within 30 minutes of downtown Denver, Boulder, and the mountains. So you have a greater pool for tenants than when you get south or east of Denver.

Taylor Hansen · Answer

Hey, Brandon! I actually grew up in Aurora! I know the area very well and while it can be a challenge finding anything sizeable in the Denver metro for less than 500k, there are definitely some options with 3 bed/3.5 bath that will work with your budget. Aurora has a strong rental market, but the areas that John Mayer mentioned are also excellent for investments. Englewood and Lakewood are personally some of my favorite areas and they offer a lot of desirability because of how accessible both downtown and the mountains are. The more competitive you can be with your offer, the better. I recommend checking out a service like Accept.inc which can help you get pre-approved for your mortgage and then negotiate as if you have a full cash offer.

Colleen Mullins · Answer

Hi Brandon, I am a licensed real estate agent (since 1998) and purchased my home in Aurora in 1986, so I know Aurora! You have to be careful if you are looking to house hack with an Airbnb, many counties have guidelines and restrictions on this. For example, in Aurora it must be your primary residence (no investment properties) you will have to obtain a business license and pay State (4.25%-5.0%) and Lodgers tax (8.0%) Some areas will not allow Airbnb at all, so be careful and do your due diligence. Even if you are going to do a long term (over 30 days) you also have to adhere to the number of unrelated people living in a home per county regulations. In Aurora you are limited to "an individual or two or more persons related by blood, marriage or adoption residing under one head of household, or a group of not more than five (5) persons, who need not be related, living as a single housekeeping unit". Will they check? Probably not, unless you really tick off the neighbors - and trust and believe, the neighbors do call.What I'm saying is there is a number of things you need to consider besides number of bedrooms and baths. You have to have a plan.

Ben Rhodin · Answer

------Hey Brandon!You aren't wrong in your thinking, that is the primary demographic you are targeting. There are some other tenant pools that you can also target (Military, Student, Traveling nurses, or other contract-based workers). But the options are pretty endless, and there isn't a shortage of tenants to place into these properties.

Stuart Grazier · Answer

@Brandon Itkin A lot will depend on your budget. I personally think a good area to house hack, with probably the best chance of getting the highest rent-purchase ratios will be Aurora. You have the military base close by that could provide quality renters, plus quite a few of the major hospitals (Childrens, CU Anschutz, etc). I'd highly recommed you get prequalified with a lender before making offers, as that will make you much more comptetive in the market. I can also recommend a few good Realtors who sprecialize at looking for properties to house hack.

Chris Freeburg · Answer

@Brandon ItkinUnder $450k is going to be tough in Aurora. If that's a strict budget, I'd look west/northwest of Denver. Also, the market is appreciating about 1%/month right now, because there's no supply. Keep looking to educate yourself, but also prepare for price increases by summer. If you're going to house hack, I would also consider where you want to live. I've got a house hack where my tenant commutes to Boulder, so I'd be careful about making too many assumptions about tenants up front. If it checks the boxes for neighborhood, good living situation, parking, you'll find the renters. The more boxes it checks (private bathrooms, storage, yard), the more you can charge, but the more you'll pay too.

John Mayer · Answer

@Brandon ItkinBelieve me, I’m living in it, it’s not crazy lol. I personally know and have met with at least 6 other investors in Denver who own multiple homes like mine, with a 3:1 bathroom ratio. In fact, I’d say it’s the norm for room rental tenants to expect that they will be sharing a bathroom with 1-2 other people. The best and lowest maintenance tenants you will ever have don’t care about having to share bathrooms. They care much more about living in a nice home, with good & likeminded people, having tons of parking, and convenient access both to the city and the mountains.

Brandon Itkin · Answer

Being a native to the area, what's the average room size you've seen? I have seen houses sub $450k in the area for 3bed, but the rooms are 10x10 which seems almost unlivable once you put a full or queen mattress in there.

Brandon Itkin · Answer

Great point on being able to convert a ranch into an in-law suite style for ease of finding tenants as well as higher possible prices. I would assume that a lot of the people renting might be younger professionals who would each want their own bathroom, while they commute into Denver, but perhaps I'm mis-analyzing the rental demographics in the area.

Brandon Itkin · Answer

Good point on parking, I think that will be the biggest hurdle. While I agree with you on being too concerned with the bathrooms at a 1:1 ratio, 1:3 is crazy haha. Maybe it's just being from D.C. but I can't imagine ever living like that or finding someone who would be okay with it. In what area are you able to rent a property like that?