Single Family Home with accessory Dwelling Unit Build Out

[John Prucha]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $350,000
Cash invested: $70,000

SFH with tons of deferred updates and zoned for an additional dwelling unit (ADU). The goal at purchase was to house hack and convert the detached four car garage into a 2/1 ADU. Due to changing zoning rules with the city of Denver there was significant delay but they eventually approved the project and the project is underway. Construction loan with Collegiate Peaks Bank is being used to fund the project with relatively low interest rate of about 5.5% during construction.

Once done the project should comp out >500K and the ADU should rent for between 1500 and 1700 which will cover the bulk of my mortgage. Let me know if you have any questions.

What made you interested in investing in this type of deal?

I was having trouble finding a multifamily that would meet the 1% rule.

How did you find this deal and how did you negotiate it?

Studied city zoning.

How did you finance this deal?

Conventional loan followed by construction loan and will cash out refinance at the end

How did you add value to the deal?

Built and ADU

Lessons learned? Challenges?

Political winds change and can make life hard. Stick with multi-family that is already built.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Collegiate Peaks Bank for the construction loan

[James Carlson]

@John Prucha

Congratulations on the buy. A SFH zoned for an accessory dwelling unit in Denver at that price? I'm guessing you bought in the Barnum area or somewhere nearby? I will be interested to see how the ADU build goes. Who are you using to do it? Are you doing a full garage and ADU on top?

I have a lot of clients who want to house hack in Denver with a carriage house or basement apartment. (On the spectrum of house hacking, it has slightly less revenue potential but more privacy for the owner. Tradeoffs.) Some want to find zoning for an ADU, and I always advise to just find a place with the basement ready to go. It's much easier.