All Forum Posts by: John Krauklis

Hi all.  I’m a real estate investor in Denver with many years of house flipping and Airbnb experience behind me. I generally stay solo and try to use bank money and slowly build my real estate portfolio.   I currently own four houses in Colorado.   I just finished a new build that sold and have purchased another lot and am in the design and city submittal process for a new build.  I have a downtown Airbnb rental, a mountain rental and my family’s property.  
 I am about to purchase my first property with hard money from a wholesaler and remodel it to hold as a 30day+ Furnished rental.  It’s a historic 1887 Victorian two story house in downtown Denver that has really never been remodeled. It has been vacant for years and looks very original and dirty on the inside.  Just how I like them, not livable and overwhelming for most.  I’m a sucker for historic properties so I get a thrill out of working on such a vintage house.  It was sent to me by a wholesaler and the charming curb appeal got me.  Next door to my Airbnb rental is a property owned by a hard money lender who is a very nice guy.  He agreed to do a loan with using a second mortgage on my rental as my part of the money in.  
I plan to have the new house remodeled, rented and refinanced within 6 months.  Then the original loans get paid back and I have a fully remodeled rental property with no cash outlay and appreciating nicely in Denver.  The monthly income should do pretty well and get me a few thousand over the monthly mortgage payment.  Is the seasoning time a concern for some mortgage lenders?   Are there ones out there that don’t care about that?
Purchase price is $488,000, renovation and holding costs will be $100,000. ARV with using some great recent comps will be $725,000.
My wife loves to decorate a house and is quite good at it.  We have most all of the furniture to go in it from other rentals.  Then I will list it on Airbnb for 30+ days and hopefully get $5000 a month.  Are there other big furnished monthly rental sites to consider?

Then do it again!   Looking forward to gaining the knowledge and experience of working with the hard money loan and the wholesaler.  I was surprised that the hard money loan is not that much higher for what a bank mortgage would cost.  If I can get it done in 5-6 months, I will only be paying at most $10,000 more to go the hard money route.  For me, if I can get the deal done and quick, that’s worth it.  And I’ll make that back in appreciation in a few months of owning it.  Better than sitting on the couch!   Rise and grind!

John

Great post and thanks for the insight of the current steps in the process.  I love ADUs.  I built one at my house in Baker about 6 years ago and it was very easy then and I did it cheap by doing a lot of the finish work myself.  Back then the historic district did not have much of a say and I am already zoned for it.  I have a property in Capital Hill that has an original 1896 built carriage house on it so the idea is not new.  I have also finished out quite a few not permitted adus since the owners wanted nothing to do with dealing with the city. I think the process and hoops you jump through are completely ridiculous.   The city should make it much easier to create this great urban form of housing.  The nimbys can go pound sand, or move to Parker.  Welcome to the modern Denver city.  
I wish the city would clear a path to allow for a small ADU that is cheaper to build and very easily rented to be legal in Denver. I hope the full city designation is coming soon.
As a real estate investor, I alway look at how to add value, and making the garage rentable in some way is one good way.  Nice to hear the process is possible in areas not zoned for it.  
thanks!

John

All the west neighborhoods are great- Westword, Barnum etc.  You can get away with a lot there cause everyone is renting their garage that has an ac unit in it to their cousin.  
I would seriously consider buying an RV 22’ or less and parking it in the backyard for extra income!   
West side of Baker (my hood), Santa Fe arts district has some things in your price range and is great location.  
I have done well with Airbnb, ADUs and renting everything I own to get ahead in real estate and now it is my full time job.  Lots of str opportunities here.  
Denver is hot for real estate and will continue to be.  

You are right about the expected costs of building a new ADU. It is basically a 1500 sf new sfr.

If you want to build it yourself, check out Homewrights.com  Great company, I am doing a new build with them now and will sell it this spring for a great profit.  

If you want a cheap adu, build a 17’ tall 3 car permitted garage For $35000.  Then after the permit is closed, finish out the inside however you want and for cheap.  I did this for a buddy who lives in Westword and he is loving it.  He is finished it and is fully rented for under $80,000.  I can show you two versions I have built around Denver.  
Or buy an RV that is under 22’ and park it back there and rent it on Airbnb.  Then you are in it for less than $10,000 and are bringing in $80 a night.  

John

Nice work.  Glad you made something on it.   Flipping used to always work out.  Now the fix to rent looks good.  Especially here in Denver with 10% appreciation.  

What’s next there?

Yes to permit and inspect a garage is very easy and straightforward.  I use Merrill with landmark garages to build the structure.  He can have the permit pulled in a day.  He closes up all the garage permits.  Then you can do what you like with the structure after that.  

I have built with and without permits.  Sometimes it is just more practical without.  With how busy architects and city permitting is, you could be looking at a year before you break ground.

I have built many of these in Denver and will tell you that $200,000 is about right. With the headache that the city is in the approval, permitting and inspection process, it is hard to find a contractor willing to do it. The city needs to loosen up on these if they want more density. My favorite way to build one is build a permitted $30,000 garage that is 17’ tall, close all the permits, then finish a living space out at your leisure later. My buddy did this in west Denver and came in at about $50,000 ready to rent. He plans on adding a second unit below at some point. Not that I encourage anyone to do something without a permit.  

My permitted adu I built about 5 years ago when it was easy to do. 

I live in Denver and own four properties here.  Last year I bought out of state in St Louis because of the crazy low prices there and having family there. For me, I will not buy more out of state and concentrate my time and efforts buying more in Colorado.  

The numbers gave me my answer:

4 Colorado properties all at $1 million valuation now x 8-10% appreciation a year = $320,000- $400,000 per year growth!

1 St. Louis property at $200k x 3% appreciation = $6,000 per year.  

Yearly income is good in St. Louis but there are ways to make great income in Denver.   

It’s fun to buy at cheap prices but I would rather put my time into buying right here where I am and getting more appreciation on higher priced valuations.  Definitely have to deal with mortgages, but it’s worth it.    

@Bill S.  Love to hear the projections.  I firmly believe this rocket ship has a ways to go still. 

I’ll be buying more here in Denver.  If I can find it.  

It was a commercial property that I found on LoopNet. It needed a lot of work so it scared people off I think. With the historic tax credits and a good appraisal, I will be plus $50k on the finished product. Then when it is fully rented, I should be taking in $2000 a month. 

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Does anyone know of a lender in Denver offering home equity lines on investment properties?  

I have a few properties that have gone up a lot in value and would like to take some equity out but don’t want to refinance into a jumbo loan. They are currently financed just below jumbo ($450k) since the limit in Denver is quite low relative to selling prices.  I would like to take out about $150k to purchase another property. 

Thanks. 

John