All Forum Posts by: Bill S.

@Alec Bildstein my advise in addition to attending meetups is to read the forums and see who contributes and adds value and find the folks that you resonate with. You can also research those you meet at the events by reading their posts here as well. That said, the good one come via word of mouth from other investors. Talk to investors that have done deals and ask who they used and when you get the same name a few times, you have someone to add to your list.

@George Zev My heart goes out to you with regards to dealing with a HOA. I have no legal advise to you. What I have seen is that you would owe the $6k charge one way or another but you should have an attorney weigh in to be sure.

@Trace Adams so IMO you have the cart before the horse. You should KNOW the rental laws before you even look for a property to purchase with the intent of renting it out. 

Typically the local municipality supersedes the county regs. That is if the property is with the City of Littleton then Littleton rental laws apply. If it is in unincorporated Jeffco then Jeffco rules apply. It's a really big difference too. 

In all likelihood you cannot "turn it into a duplex". Zoning laws typically want to keep single family neighborhoods as single family neighborhoods. Some areas allow ADUs if you live in the property so what works now may not be legal if you move out. 

All electrical work requires a permit. If you add a 220 outlet for stove/range then it requires a permit. The permit for 2nd range (220 outlet) at a property may be turned down if the property is not zoned for two units.

@Michael Calvey so where to start. 

1) Colorado laws have changed and there are strict requirements that must be followed with severe consequences ($$$$) if you don't. Too much to cover in this reply. I will cover the ones that come to mind in reading your post. There are some exceptions for owner occupied properties so make sure to understand if the exception fits. I don't know the exceptions since they don't apply to my business. I own more units than qualifies for the exception and I don't live in any of my rental properties.

2) 3x rent is illegal in Colorado now.  Colorado law says landlords can't reject applicants for income if they make more than 2x rent on a monthly basis. Yes 2X. It's crazy and clearly legislatures have no clue about the rental business but it's the law.

3) Colorado now requires that a landlord cannot reject applicants for being felons if the felony is older than 5 years ago.

4) Colorado now requires that landlords cannot reject applicants for being evicted if the eviction was more than 7 years ago.

The most important is: Write down your criteria ahead of time and do not deviate from it. I will repeat. Write down your criteria ahead of time and do not deviate from it. If you get it wrong correct it for the next vacancy but hold the line for this one. Adjust price but not the criteria mid stream. The pull will be to bend the criteria when you are desperate and it NEVER ends well.

The marketing advise is the best. Most exposure and quality ad is very important.

As other have said. Call and check references. Verify character of folks. Do they do what they say and pay their bills. 

I have heard the car thing a lot over the years but it fails to cover whether or not they pay their bills. I had an applicant with a impeccable Mercedes that multiple accounts in collection. I don't know how they would have been as tenants as I didn't rent to them.

The bottom line is ... A vacancy is a blessing compared to a bad tenant.

@Immanuel Pierre one thing I have seen people do successfully is to use one of the current tenants as the "house parent" and reducing their rent a bit for the added headache. I realize it could be fraught with peril but it would be cheaper than a property manager and easier to find. 

@Kyle Allen I think probably the best approach to real estate investing here in Denver right now is a live-in flip with house hacking on top of that. You might be surprised at what you can do. The market here is a bit of a puzzle for me. I see people buying in the multi-unit space (5+ units) that are buying turnkey properties at a 6 cap and paying 6.75% interest with the loans they get. They are getting a leveraged cash on cash return of less than the 10 year treasury yield with the added risk of owning and managing real estate. It make no sense to me and multi-unit (5+) are typically cheaper that the 1-4 units on a per unit basis.

As for MTR - I have a property I considered going the mid term rental route. My quick analysis had the added cashflow taking several years to recover the cost of furnishing the unit on top of the added management required for a short term rental. The juice wasn't worth the squeeze for me but I did not do a deep dive into it either. My costs might have been high and my rents too low so don't take my one data point as the answer without doing your own research.

@David Walton Colorado requires that security deposits held by brokers be held in a "Trust Account". This is a special type of account. Since it is a "trust account", if you go bankrupt, the creditors cannot access the funds in that account as it is not your money. I would suggest that you get with an attorney that represents real estate agents and run your plan by them. Frascona Joiner Goodman & Greenstein PC up in Boulder is a great place to start. While I use Tschetter Sulzer as my attorney for Landlord Tenant issues, I don't think they regularly practice in the area of Real Estate Agent representation. I would completely agree with the idea of putting at least some of the funds in an interest bearing account if you were self managing and not a licensed agent. 

On a personal note, I was audited by the state and found out that the bank I opened my "trust" accounts with for my brokerage with did not actually open true "trust accounts" for me. The lackey that opened the accounts added the label "trust account" and thought that was all that was needed. I did not know what was done. Fortunately I was not using my brokerage to manage my own property and I was not doing any property management for others so I was not required to have the trust accounts that I thought I had but didn't have.

I do know that not all banks will set up true trust accounts so finding one that will pay interest might be a bit of a challenge.

@Melanie Wilmesher so my advise. Ask him what he would take. The one who offers first, loses is the general rule of negotiation. When you counter, make 3 different offers. Make them all in writing and make them all ones that you would accept. Let him choose which offer to accept. With three offers there is less likelihood of him countering. He will just pick the best one for him. It also reduces the chance of him saying "no" as he has 3 offers so what other choices are there?

Finally, play the long game. A "no" today may be a "yes" in 6 months if you have kept in touch during the in between times.

Please keep in mind the issue of value. Sure a SFR by itself is worth x but this house is not by itself. The fact that there are 5 units significantly impacts the value due to the financing available for such units (incomes based value for 5 units vs comparable sales value for SFR). Unless you can split off the SFR and sell it individually, it is significantly devalued by being coupled with the four plex. The reality is the resale value might be greater if you combined two of the one bed units to make a two or three bed unit so the property would be a four unit property and qualify for the 30 year debt financing of conventional owner occupied multifamily property.

Another option would be to split off the house and sell it as a separate unit. Remember that both lots would likely have to conform to the zoning requirements for each lot (not likely in most cases but worth looking at). 

@Kristen Dolotina there area also stand along systems for taking automated payments from Tenants. I use a service called ClearNow. It is an ACH. I know @Randall Alan mentioned the time it takes for ACH to clear but those deposits that the software deposits into the account can be taken back if the fund end up not being there. 

I use the Zelle app to collect upfront money from tenants and it is instantaneous with no take backs but it is not automatic so I doubt you could set it and forget it. Also the sender has to initiate the process so your tenants would have to do that each month. Again not automatic. In addition, it sometimes poses limits on the amount of funds you can send in a day, a week or a month.

@Noah Bacon My vote also for the house hack approach. The sell and scale up crowd don't mention the costs associated with that approach. You have all agent fees as well as title fees etc. Those fees are based on the whole price of the property so selling property with 20% equity can shrink down to 10-15% equity pretty quickly which means you lose between 1/4 and 1/2 of what you made. 

Hang tight for now. Build some more equity and see how it is to have your properties some distance away from yourself. You can always scale up later if you find you don't like the long distance landlording.