All Forum Posts by: Ben Rhodin

Hi @Brittany Weimer! Congratulations on your start in investing, you will find no shortage of resources and great people on here! You already took the step that I suggest to a lot of new comers who have primary residences. Repurposing your own home, and moving into a new one is an easy start into being a landlord and investing. It will provide you the bones without a lot of the risk.

As for resources, you'll find no shortage. I would get started with some of the books here on BP (Set for life, and the Landlord book are good starts). I would also suggest some meetups, which we at The FI team host quite a few, our biggest one is the Househacker's meetup, which our monthly one is this Wednesday the 16th. It is a great resource for networking with local investors. There is no shortage of meetup's or podcasts, and I would suggest going to and listening to as many as you can!

I wish you the best of luck!

Hi @Ryan A Shumaker! As Luke pointed out above, finding cash flow in a high appreciating and hot market isn't impossible. You just need to get creative! It's about finding those creative strategies that will increase the cash flow potential of a home. As Luke said, you can do rent by the room which is a great strategy, and typically will yield the greatest cash flow. Other strategies include... finding a way to split a single family into multiple separate living spaces (The main floor, and basement. or converting a garage, or an existing ADU), Short term rentals (just be careful with city regulations), or furnished mid-term rentals (Travel nurses, or other contract-based workers). These are only some ways that are possible, but it will come down to spending the time and looking at properties in a different way than just a traditional rental. I personally love the multiple living spaces model, as it is not a ton more management, and it gets you the benefits of multifamily without the price point. Just make sure to verify any regulations such as occupancy, with the city prior to doing anything!

Hi @Dana De Andres! 

Definitely not a bad place to be in! While as Jaron pointed out above that a lot of properties don't pencil out as rentals. But given enough time, and your mortgage stays the same, and rental rates increasing year over year (in most cases) most properties will eventually work. Where is this property located in Denver? I wouldn't be surprised depending on where you bought, that rental rates have risen that much over the 4 years. But I would make sure that you are running your numbers correctly, and factoring in all expenses (PITI, variable expenses, and management if you won't be self-managing). You do need to make sure that you are running solid numbers, and taking out the new mortgage will basically put you in the situation as if you bought the home today and might screw up your numbers at that point.

Without knowing the exact property, but saying that it will appraise for around 600k today you will be looking at a mortgage payment in the mid $2000s, assuming you leave 20% equity in the property, as to not have to refinance as owner-occupied since you'll be moving. 

Personally, if I was you, I would look to get a HELOC on the property instead of a cash-out refi. If you get one while you are still occupying it as your personal residence, you will get better rates. This way your payment on the property will stay the same (your cash flow will be better), and you now have a revolving line of credit you can use for your DP on a new place, and then once you either refinance that place or just pay off the HELOC you can do it again. The cash-out refi you'll be paying for the next 30 years, and if you sell the property you lose a cash-flowing asset.

My best tip is just to run your numbers and have someone double-check them. If the numbers work, and the property cashflows then I always lean on keeping it. But you have to make sure your numbers are solid. They won't be 100% accurate, but they should be on the conservative side.

@Adam Parker Gotcha! good to get a little more info on the situation. I know HELOCS on investment properties have been really tough lately due to COVID. I would keep checking around with local banks and lenders as I know some are starting to pick them back up. Vectra Bank who I use has been saying they were going to bring them back in the next few months (this was back in January) so I would see how far out they might be, as it might be worth waiting. 

I would still explore your options here in our great state, as that is still a good chunk of equity to put to work here. Especially if you get a little creative, you could definitely make a decent return! Happy to discuss further!

Hey @Kolby Leitch! 

I have some good contacts for this kind of work, I'll send them over to you in a PM. What I have found the price tends to hover around $12k if it's a straightforward stairwell and entrance install (probably a bit more now because of material costs). It will go up from there if setbacks or other issues are present where you are planning to install it.

Are there no other existing entry points that can be reused and repurposed? I typically don't recommend this option because of the cost, but if it's the only way and you have the capital, go for it! I'm guessing that the basement will act as a separate unit?

Hey @Adam Parker! 

That is definitely a good position to be in. How are you utilizing the equity? Cash-out Refi? Heloc? Selling? and is this on your primary residence or an investment property? Depending on the situation there may be more than one direction you could go... and what is your reasoning for not investing here in Denver? The market is definitely Red Hot but that doesn't mean it's impossible, but I think you'll find the same conditions anywhere else you go in the US right now.

My first question would be regarding your current living situation. If this is your primary that you are in and have built up that equity, how about putting a HELOC on the property (while it's still your primary) and picking up a new primary residence? Either to house hack (multifamily, or creative single family) or just to move into and turn your current primary into a rental. This way you could utilize a low down payment loan, keep the rest of the equity for improvements, another property out of state or here, or for reserves. You'd get a cash-flowing rental, and if you house hacked you could reduce your living costs.

Or if house hacking isn't an option, but the equity is still in your own home, I would still go the HELOC route, and look at some more creative avenues here in Denver. If you assume you'll have to put 25% down on a property you are looking at less than $400k purchase price. This would put you in the realm to get a smaller property, that you could furnish and do either STR or Midterm rentals on. This is a pretty strong sector right now, and can produce some good cash flow!

You could also look into getting a second home mortgage (10%) here, or somewhere close to Denver. Some lenders are more flexible with what they require to qualify as a second home, or vacation home. Then you'd be able to increase your buying limit here in Colorado.

You could also put that money into a Flip if you wanted something more active, and create more funds to put towards a bigger buy and hold. There are endless opportunities, and I wouldn't count investing here in Colorado out until you've exhausted those options, as you can get the same if not better cash flow (if you are creative) and still have the appreciation. Which you won't see in a lot of the other out-of-state cashflow markets.

The reason I suggest the HELOC route is because of its flexibility. If you sell, or cash-out refi you will end up with a lump sum that you'll be paying for even if you don't use all of it, HELOC you only pay for what you use, and once it's paid for you can reuse it!

Hope that helps some!

Hi @Eric Brewer! 

I would stick with keeping the properties as long as you are able. But I prefer to buy and hold vs quick profits. Personally, I do not believe all the concerns about a bubble, and comparing today's market to 2008. There are completely different factors steering the market today, and if anything we will see a correction and stabilization, instead of a crash. If the numbers work on all the properties, then why not keep them? If you're wanting to take advantage of the equity, and not dip into your savings for the new property, I would suggest looking into getting a HELOC on the primary before you rent it out, and use that to fund the cash to close. You get the same benefit as selling or cash-out refi, but instead of receiving a one-time lump sum of cash, you now have a revolving credit line you can use for future needs, future properties, or reserves. The best part is if you don't use it you don't pay for it, unlike a cash-out refi that you'll be paying off for the next 30 years.

Hi @Brandon Hagen! 

This is definitely a question that I come across a lot with my clients. It seems very enticing and like it help further increase the approachability of property in this market. I will say that it depends on your situation and strategy, the biggest hurdle that I hear from my lenders regarding all the different assistance programs is the fine print. Most of these programs want to make sure that you are occupying the property for an extended period, and will have increased fees, and stipulations. This hinders any house hack situation if you are planning to spend one year in the property and move onto the next one. Most of these programs require you to occupy the property for at least 3 years typically, so it really slows your growth if you are house hacking (which I am assuming if you are planning to use these programs). 

I have not dug into the Multifamily programs as much, and they may be different. I would contact a lender and get insight from them, as they will be better suited to discuss all the terms and pitfalls with the programs. Typically when you deal with the government there are more strings attached.

Hi @Jill Valentich! 

Definitely not a bad situation to be in! I'm going to go off of @Jeff White's suggestion and suggest the option of putting a HELOC on the property. Since it is your primary (I'm guessing) at the moment, it will be nice and easy to get one on great terms. This way you don't need to increase your mortgage payment on the property, and you can still take out an amount and use it as a downpayment on your next property if needed. The great thing about a HELOC is that you only pay for what you use, and you can keep reusing it for future investments. Pulling out a HELOC on it, for say $125k (assuming the house appraises for 450k and you have to leave 20% equity in the home) you could use a portion of that to put a low down payment on a new purchase (which you could house hack if you want to maximize your returns), then you can use the rest of your HELOC to either fund some improvements, or put as a down payment on an investment property somewhere else, or leave as a nice large credit card for reserves. HELOCs are one of the best ways to pull out equity and be able to reutilize for more and more deals. I tend to prefer them over a cash-out Refi, as if you cash-out refi for say 100k you are paying for it for the next 30 years, vs a HELOC if you use it to purchase a new property and BRRRR it and refinance (or just wait for appreciation to do the work and then refinance), you can repay the HELOC, and boom you aren't paying for it, and you can now reuse it.

Welcome, @Jason De Jongh! 

I will quickly beat a dead horse and agree with what Chris and James both said above. House hacking in your backyard is one of the best ways to begin your investment journey. It is a low-risk, high reward way to invest, and will help get over those newbie jitters. Cash flow is completely possible with the right strategies and creativeness here in Denver, but if you want to live comfortably you can do that at most likely still lower your current living cost to less than what you pay for your cheap apartment. There is a flavor for everyone when it comes to house hacking and there is no one size fits all solution! :) 

Finding a deal is going to come down to your goals and criteria. I have had numerous clients that weren't seeing any "deals" until they solidified a strict goal limit for their property. Whether that be completely getting rid of your living expense, or minimizing it to less than $500 a month (or less than what you are paying now) it doesn't matter, but you need to set those standards. Once you have strong criteria for what a "deal" is to you, you'll begin to see a lot more of them pop up, and you will have a quick and easy way to analyze any properties that come through! It can be tough to determine these criteria and that's why it's important to have an agent on your side that can listen, and help you solidify some realistic criteria with you!

As for picking a market out of state, I will tell you from personal experience that hunting for the perfect market is going to hurt you in the long run. Once you have a few narrowed down, start reaching out and building your team in these markets, whichever one you can find a worthwhile team in is the one I would go to. It goes back to establishing those criteria as well, if your goal is cash flow, then how much cash flow per door? What price range? What kind of properties? 

I spent 3 months exploring markets around the US, each time I thought I found "the one" I found another one that looked a bit nicer! So I finally said to myself "that's enough" and I just settled on one that I had already found a Realtor in. Less than a month later I had a deal that is now cash flowing about $300 a month. In the end, it is more important to jump in than it is to find the "perfect" market, you can always adjust later.