Help Analyze Denver Duplex for Cash Flow/House Hack Potential

[Katie Hoffman]

Hello all, I live in the Denver area and am interested in living for free through a house hack. I found a property on Zillow in the Westwood area (which I believe will be a high appreciation area). It is already in turnkey condition, however, could still be updated a bit to force appreciation eventually. It is a 2 BR, 1 Bath duplex going for $262,500 but there is the option to buy the other side of the duplex and have both units for $510,000. If I put 3.5% down, I would be paying $3235 a month for both units. Zillow estimates that each unit would rent for $1800 a month. However, this seems high to me? How can I be better sure of what kind of rent I could expect out of the unit and does this sound like a deal that would be good to invest in? I'm 100% new to this and don't know what to look out for. Any resources/guidance appreciated! Thank you. Ideally I would like to only live in the unit for a year myself and then use the money from renting both units to pay for a home in the Highlands Ranch area for myself or invest back into out of state turnkeys that cash flow. If I rented out both sides of this property at $1800, I would be cash flowing about $365 a month. If I lived in one unit and rented out the other, then I would have a mortgage payment of $1435 which also seems high to me for 717 square feet of space. What am I missing? Thanks! The address is 2841 W 3rd Ave, Denver, CO 80219 listed here: https://www.zillow.com/homedet...

[Jeff White]

@Katie Hoffman Congrats on looking to house hack in Denver, that's a great idea to achieve your goal of purchasing a house in Highlands Ranch or out of state rentals long-term. 

I know that area of town very well since I have a couple of properties over there, and I'm getting 1,500 for 2/1s that are updated similarly to those without granite countertops. The big issue I see with aiming for 1,800 for that place is that it is a multifamily property: shared walls, no garage, location (close to Federal), no A/C?, and a really small two bedroom place - 717 sqft means tiny bedrooms. 

Thus, because the size of the units and timing (November and December are not the easiest months to find tenants), you are looking at 1,550-1,650 rents per unit most likely. 

Also, the best way to determine rent prices is to get onto Zillow, trulia, hotpads, facebook marketplace, and craigslist. Look for properties nearby and see what your competition is offering their 2/1s units for. Since it is a duplex, you have to look at apartments, townhomes, condos and other multifamilies since those are your comps, not houses that are 2/1s.  Look at other 2/1s that have similar square footage and updates. 

Looking at the listing, it appears it was rented for 1,395 back in May 2018, so that's not a bad baseline. Since it was recently flipped and has nicer features with market/rent appreciation, you will get more than that, but probably not 1,800.

Also, if the property was split since they are selling each half, you would have to combine them into one legal description to purchase as a duplex since right now, they are selling each side individually and you would need two loans to purchase.