All Forum Posts by: Brad Saari

@Austin Snow

Oh the joys of Denver zoning....if you go the route of asking for a variance please report back on your experience....I always just assumed I was locked into whatever the 2010 rezoning allowed for. Thus I've only bought TU, RH, MU, RO, etc 

I look at Craigslist and Realtor.com to get a feel for listed rents in the area.

@Olivia Romano @Zeke Freeman @Jonathan Harris @Kevin Grinstead

Whoa, $170k is a big number!? I echo the sentiments regarding details. I think ADU's make good sense in Denver for adding rental income but my head was in the $90-$120 range. $150-$170 has me questioning validity.

I've been searching around for companies that specialize, have knowledge in this space with little to show for it. Zeke and Jonathan I'd love to pick your brain about what's possible.

@Ross Dillingham Those are industry standard tests for quickly evaluating a deal. 

Rule of 2: The 2% rule says that for a rental property investment to be “good”, the monthly rent should be equal to or higher than 2% of the purchase price. I  actually had  a flub in my calc - change it to monthly rental income / purchase price. I don't really pay attention to this one as its not realistic for my market. I generally shoot for over 1%. 

50% Rule: another gauge to quickly analyze a deal. Most investors find that their operating expense historically net out to 50% of revenues or rental income. There is a lot that makes up op expenses and its probably the trickiest part of analyzing a deal. But to quickly apply while analyzing: Total rental income - (total rental income *.5) = NOI. You can then apply your debt servicing to arrive at cash flow.

There is no 40% rule, I made it up as I feel 40% is a more accurate gauge for me. Expense as a % on income is just showing how close I am to 40% or 50% i am in my operating expense assumptions.

I would also look at zoning. Is the property zoned two unit or duplex? 

Taxes are the way you need to report. You may consider paying an accountant at least for the 1st year, there are many things you can deduct - depreciation of building, interest, repairs, etc. I'm not sure why VHDA would have any bearing but not my area of expertise....

Firstly, I would start reporting that income. It will keep you on the up-and-up with the IRS and it has tax benefits. If you have equity in your current house look at a home equity line of credit for the down payment on your next property. Some banks will go 90% LTV. For example, if your house appraises at 150k and you owe 100k you could have $35k in a HELOC -> (150*.9)-100 = $35k .

Keep in mind that you will pay capital gains tax if you don't reinvest the money from the sale into another property, believe its called a 1031 exchange. There's a relatively short window between closing and reinvesting....something like 180 days. 

When you say "use" do you mean will it count as income on your Debt-to-Income ratio? Have you been claiming the rental income from downstairs on your taxes? If so, they will more than likely count that portion of net rental towards income. Guessing the upstairs rent wouldn't count until its been claimed on your taxes for a year or two. Sit down with your lender, only they can answer these questions definitively 

@Bill S. Yeah, I think the inability to eventually move out of it and rent both units makes it a no-go. I'm carefully studying the Denver zoning map today :-)

Generically I think I need to stick with: MU, MX, RH, RX, TU for multiple units.