All Forum Posts by: Jeff White

@Markee Jensen Congrats on taking the first step and setting a goal for yourself!

House hacking is the best strategy for maximizing your returns, buying a future investment property with a low-down payment loan, living for free (or close to it), and learning how to be a property manager. To me, it is giving you the education of being a landlord every day that you live there since you are on-site.  

What market are you in? That will play a big role on which strategy to use. 

My market is Denver, and rent-by-room is a great strategy since houses costs 450-500k on average here and multifamily is even more expensive. Since my market is a very popular millennial market, there is a huge demand for rent by room since it is an affordable entry level way to live here in Denver. One thing that I look for is large single family houses with 5+ bedrooms and 3+ bathrooms, and usually, even in my market, one can cash flow $1k over the mortgage. Is it more work? Absolutely.  Will there be challenges? Yes.  Is it worth it? YES!!

House hacking isn't for everyone, but for people that already have roommates, live in apartments, etc, it won't the biggest change. Imagine living for free for one year straight, and think about how much more money will you have in your checking account, that's the power of house hacking. It won't make a millionaire overnight, but it will set you up for success and the ability to scale (if that's your goal) long-term. 

@Jordan Copeland Congrats on planning ahead and setting high goals for yourself. 

To answer your questions:

1) No, when you purchase a house hack property, the reason why you get a low-down payment loan with a low interest rate is because you are living there as your primary residence. The loan is in your personal name, not an LLC.

If you want all your properties in an LLC, you will pay higher interest rates.

One way to mitigate the risk while you have house hacks in your name is to get an umbrella policy on top of your normal insurance policies, that will give you a little more reassurance. 

2)  Depends on your comfort level... taxes are really simply for your first one since if you pursue the rent by room model, you can take a percentage of all the space that is shared and the space that you occupy (talk to an accountant to confirm). Also, as a W2, it is really basic. 

It is great to be thinking long-term with your planning, that will serve you well!

@Lindsay Massengale Welcome to Denver Lindsay!  Denver is a great market for buy-and-hold investors since you can long-term appreciation (6% per year on average the last 40 years), tenant class, and some cash flowing properties as well.

For straight investment properties, the best cash flowing ones are probably the east Aurora around the 200-220k mark for 3/2s. 

For the greatest appreciation, you will pay a premium for areas such as Wash Park, Highlands, Sloan's Lake, Cherry Creek, etc. 

For most people, it is somewhere in the middle. 

Therefore, it depends on your goals and wants long-term.

Because of Denver's high cost of living, it is easiest to house hack properties, which is simply buying a house/condo/multifamily property and living in part of it and renting out the other part. Because you are living in that property, you can utilize a low down payment loan product vs. 20% for buying an investment property. 

Also, most people like a little privacy, so a popular choice is a single family house with a mother-in-law basement apartment that people Airbnb or rent out to normal tenants.

From my experience, house hacking is basically subsidizing your living costs while you live there, and after you move out, cash flow positive or break even. It is buying a future investment property as your primary residence.

@James Jones

That's awesome you are moving to Denver. 

It's fantastic that you are already planning ahead because house hacking is that powerful, especially here in Denver.

4 unit multifamily properties work best from the numbers compared to 2-3 unit properteis, so that's great you have already have a goal in mind.  

My first house hack here in Denver was a 4-unit, and I used a FHA loan, so I know sellers do take those offers, you just need a good broker and lender that understand how to write and compete for those types of properties.

@Josh Horst That's awesome you graduated from CU Boulder, that's where I graduated as well with a degree in Finance.   

It's fantastic that you are already planning ahead because house hacking is that powerful, especially here in Denver.  

I've done a total of 4 house hacks in Denver, and it has gotten me closer to my dream of financial independence. I'm almost at the point of replacing all of my W2 income with my rental income from house hacking a little more creatively (using rent by room to increase the returns).

Since you are a recent college grad and going to grad school, I imagine that you are used to living with roommates, so the strategy that has worked for me and other house hackers in Denver is buying a large single family in Denver metro (basically anywhere within 20 min of downtown Denver between 400-500k), and living in the smallest room and then renting out the other rooms. There are plenty of prospective renters to rent for $650-850 per room, and you get hands on experience dealing with tenant issues, common house rules, leases, etc.   

Thus, if you can find a 5+ bedroom house, you have the ability to live for free and then exponentially increase your savings. 

@Mark Willson Welcome to Denver! You will appreciate the winters here much more since we get 300+ days of sunshine. Unfortunately, BRRRRR is not a strategy that is most effective here, at least not in Denver. The median price for detached single family houses is $460k as of December 2020, so it is definitely very expensive to get into Denver, and that's the median house!

Also, you usually want to find a good deal where you can add 20% value, so basically over 80k at least, and that is very hard to do in this market when inventory is so low and demand is high. It isn't impossible, and some investors can do it, but they spend tens of thousands of dollars every month to market for off market deals and even then, it isn't that easy for them, and they have huge lines of credits available and deep pockets. 

BRRRR is a great strategy for lower priced markets that sell houses in the 50-125k range since adding 10k-25k is much for realistic.

The best strategy for Denver is house hacking using the rent by room strategy by buying a large single family house living in the small room and renting out the other rooms. Other strategies that work well here are buying a house with a basement apartment and live upstairs, and Airbnbing the basement. Also, some people buy a house with a basement apartment and rent to travel nurses or normal tenants as well. Lots of strategies still work, you just need to find the right property.   

Personally, I've house hacked four times in the Denver metro market, using the rent by room strategy, multifamily, Airbnb and normal rentals, and it has moved my financial freedom number much closer. Since you are coming from university, you probably have roommates right now, and if you have a great W2 job coming out, I would seriously consider house hacking and the rent by room strategy because you only have to house hack a few times to achieve a solid FI number to choose your passions.   

@Josh Baker The FHA appraiser's job is to look for health/safety issues and recently sold comps, not verify everything that is permitted or unpermitted work, that is up to the prospective buyer to confirm and verify.

For a FHA 203k loan, that would be something to discuss with a lender that has done that loan product before.

Based on things like the chimney leaning and garage falling apart and probably a bunch of other things, that would be a great use of the 203k loan if you can convince the seller to accept it. The Denver market is extremely competitive, and I'm curious to see if you can convince the seller to accept a offer with a 203k loan. 

@Anastasia Bourdon That's great that you are house hacking in Harvey Park, I currently have one over in College View, and southwest Denver is a upcoming area, especially Harvey Park. 

I think your friends are trying to negotiate a better deal since they know you.  Reverse it.... if they weren't your friends, would they be trying to negotiate the rent being too high for a room?

 The reality is that you are pretty much right in line with the market. Your two friends will basically get an apartment to themselves, and they only have to share the bathroom with one person. For my rent by room tenants, I'm getting on average $750 per room including utilities, and my rooms are not as big as your rooms. 

Also, like the above person mentioned, get everything in writing, have leases for each of them, and also, go over a common house rules addendum as well discussing drug policy, quiet hours, trash schedule, etc. 

@Christian Albright To add a little insight for your goals, there are lots of great properties in west Denver, I've done the rent-by-the-room strategy to great success from the selling points in Westwood that you mentioned, and the demographic of rent by room people will like the proximity to 6th Ave to go to the mountains, Red Rocks, close to downtown, lightrails, etc.   

Also, from your construction background, you can definitely find properties that fit your criteria and price point, and there are tons of properties in those neighborhoods that need lots of work too. 

@Brad Toy Welcome to Denver! Since you are looking to become a new agent, I would suggest you explore different neighborhoods, it is one thing to look on the MLS, but another to actually drive by and get a feel for neighborhoods in the Denver metro area. It is interesting what sells for 500k in the Barnum neighborhood in Denver vs. a ranch house for 500k in Centennial. That will give you a great education of neighborhoods, and it will serve you well with becoming a realtor.