All Forum Posts by: Chris Freeburg

@Vance Payne

Agree with the above: get the work permitted. It protects you and it's good business. Maybe you turn a quick buck, but do you really want to hand over shoddy work when you go to sell? If you're looking to do this for the long haul, your reputation matters.

Here's an alternative thought: Have you considered an ADU? Many swaths of the city were recently re-zoned to allow ADUs. Check out your zoning and lot size. Your realtor should be able to help.

@Michael Surges I think the list is good, but the first conversation will be more important. I always ask prospective tenants an open-ended question, like "What can I tell you about the place?" You'd be surprised by the information people will share that will immediately disqualify them. I'd also ask them if they had any questions about the screening criteria, that will also tell you how carefully they read the listing.

Most prospects will immediately ask for a showing. A simple 5-10 minute conversation will save you a ton of time. In fact, most often I have a good sense of tenants as soon as I get off the phone and before I even meet them. Good luck!

The beauty of the house hack! Bravo!

@Brian Fiorillo If your wife's job is in Greenwood Village and you're commuting to the airport, I'd stay on the east side of Denver around Aurora, or south around the DTC (Denver Tech Center) or Littleton. Littleton also allows airbnbs. The suburbs NW of Denver will set up a complex commute, especially as the I-25 corridor keeps filling up. With the last year, I know I've forgotten what traffic can be like in Denver.

As far as price point under $400k; to be honest, that's going to be tough. I'm a firm believe that it's better to manage expectations early. The market is brutal right now: we have less than 2 weeks of inventory, March saw an almost 7% price increase from February and ~20% from last March. You'll be competing against other flippers for deals. If you can liquidate some other properties for a cash offer or at least present that option, you'll definitely be in a stronger position.

I house hack myself - it's about the short term pain for the long term gain! (And a garage for the toys, cool place to live, and solid quality of life...) Let me know if I can help.

@Sean Barnebey 

I grew up in the PNW. Do you know Snohomish? With 300 days of sunshine, I think you'll enjoy the change in weather here!

As a new investor and new to Denver, I'd ask you: what investment strategy are you pursuing?

Personally, I house hack to build my real estate investment portfolio. House hacking leverages the low down payment and interest rates on an owner-occupied loan. Consider putting 5% down on a property every year for 4 years vs. 20% down on one property over the same time frame. Rent by the room, or find a property with a separate living space, and live free while your tenants pay your mortgage.

As far as neighborhoods, NW Denver is increasingly popular for young singles and families and has good access to the mountains. Downtown Denver has a more traditional city feel. A lot will depend on your price point. You mentioned up-and-coming: I'd look at the neighborhoods south of West Colfax. Development is quickly moving south from Sloan's Lake and the Highlands, but it's still significantly cheaper.

And yes, Sloan's Lake is definitely like Green Lake, and I'd argue all of Denver (especially the housing market) is increasingly like Seattle.

@Katelin M Barson

You're more likely to make serious money in Denver with appreciation than cash flow. The March stats were just released and because competition is especially fierce with less than two weeks of inventory, these numbers are not typical... we saw an almost 7% increase in price from February to March and almost 20% price increase year-over-year. Those are significant gains. Condos won't appreciate as fast as detached single family homes, but it's not a bad way to get in the market.

If I was looking at a condo, I would also consider other factors beyond cash flow; specifically amenities that will attract tenants and maintain the rent at market rate (things like off-street parking, outdoor/patio space, storage, office spaces for remote workers, etc).

As far as the numbers go, definitely budget for repairs and reserves. 5% vacancy (1 month/year) is typical. Read the HOA documents, but typically they cover anything beyond the condo walls, so you may be able to budget less for CapEx.

Here's a quick way to analyze your deal: Let's say it's a $500k condo with a 15% down payment, so $75k. If you're netting $500/month, that's $6,000/year, so the cash-on-cash return is 8%. If the net is $900/month, that $9,600/year and a 12.8% return per year. For comparison, the historical average stock market return is 10%/year.

@Brendan Harrison Pamela Todd is my go-to lender. She's super responsive and knowledgeable. If she can't do it, she'll be able to point you in the right direction. I'll PM you her contact info.

@Eric Shiva

What's your budget? You're going to be hard pressed to find a duplex for under $650k in this market. You'll have better luck finding a SFH with some type of rental space under this price. If the rental space is nice (updated, yard) or if you rent by the room, you may be able to push the rental income more than a duplex for the same price point. It's more work, but the house hackers who rent by the room are cash flowing.

Long term, multifamily will likely be easier to rent and less of a headache if you don't want to do the on-site management, find individual tenants for each room, etc.

Which is best? Whatever works for you: your investment goals, your budget, your desired location. It's better to get in the market sooner rather than later, so evaluate your situation and then act.

Let me know if you have more questions I can help with.

@Katelin M Barson Let's definitely talk off-line because there may be some nuance to your situation.

Technically, when you sign a mortgage you commit to living there for the next year. If your personal situation changes, then you are free to buy again. That's where there is more wiggle room then some people realize

The value to only putting 5% on an owner-occupied loan is that it frees up the rest of your capital. You have money for improvements, your purchase budget is larger, you have money already saved for repairs and maintenance, and you have some "dry powder in the keg" (as the saying goes!) in case you're ready to pull the trigger on the next one.

With interest rates this low, your monthly payments are probably not as large as you think, and your net income may not be that much greater. It's about the cash-on-cash return.

Oversimplified thought experiment: Buy one house for 20% down or 4 for 5% down each. Which would you rather do?

@Hooman Arasteh First, I question that you can't buy "good" here. Yes, the market has gotten much more expensive and competitive. I think that just reflects the value of real estate right now, especially in Denver. It's just supply and demand. I believe in the long-term, the market will only continue to appreciate.

Real Estate might be cheaper elsewhere, but there is also a cost to that trade-off. Personally, I like to invest where I live. I know the market, I know the neighborhoods, I have a team and network of contractors set up here. I know what I'm getting into, which saves me time, and the relationships I have established only continue to become more valuable over time. I lose the value of that knowledge and network if I invest elsewhere. If you live in Denver and believe in its long-term potential to continue to grow into a major US metropolitan area, it might make sense to invest here.

I'm not sure what you mean when talk about "loss". Are you predicting a drop in prices? I don't expect the market to drop. As the vaccine rollout continues, more homes will come on the market (this WILL happen, even though it seems hopeless right now, this crazy-competitive market will NOT last forever). However, when there is more supply, I don't expect prices to drop. There is just too much demand and too many people moving to Colorado or being born here. The demand will continue and it will take a LONG time for new builds to ramp up enough to feed the supply.

Many people wonder about an impending foreclosure crisis. The data just does not show that either. Most homeowners were put into forbearance (a payment plan), and most have paid on time. Very few (5% of all those on forbearance, and 0.27% of ALL homeowners) are behind on their payments. Even if ALL of those homes came on the market tomorrow, that would still only be less than a month of inventory. We're at 2 weeks of inventory, so it's just not enough to meet the demand

I think the market will slow down and will not be as competitive in the Fall as it is right now (it is truly brutal out there right now and buyers are paying a premium), but I don't see this market will get cheaper. Here's another way to think about it: Homes appreciated about $100k in the last 1-2 years. That market seemed "expensive," just like this one does, but those buyers gained a lot of equity.

Warren Buffet always talks about getting time in the market, not timing the market. For whatever dings his golden reputation may have taken in the last few months, I think that's real wisdom.