All Forum Posts by: Luke Trovinger

Hey @Esther Kim!

Like @Derrick Dill mentioned, a HELOC would be a great way to access funds for a down payment without having to draw from your index fund stash.

Here's a really good video from Brandon Turner explaining the process in a little more depth:
https://www.youtube.com/watch?v=FYNMtHSav34

Best of luck!

Hey @Charles Johnson!

There's some great options out there for a house hack, especially if this will be your first property. As a first time home buyer, if you meet certain lender requirements, you can put as little as 3% down through a Home Possible loan. Heres a link to more info on those requirements: http://www.freddiemac.com/homepossible/index.html

There are super low down payment conventional loan options (3-5%), FHA loan options (3.5%+), and other traditional loan options of 10% plus, etc. It'll ultimately come down to your eligibility, your lender's alternatives, and your LTV comfortability.

Like @Jeremy Wirths mentioned, your lender will be able to walk you through all of these options, and help you determine which you will qualify for.

Hey @Kyle McGeough! 
I’ll throw my two cents in regarding a popular investment practice in the Denver Metro area, which is house hacking. This is an awesome strategy for a first time home buyer because it allows you to use special loans that allow you to put a smaller down payment on a home, removing a portion of that barrier to entry. 
The easiest way to cash flow in the area, is to purchase a 4+ bedroom home and rent out the extra rooms in your house. Using one of these first time home buyer loans (there are conventional and FHA options), you'll need to live in the house for at least a year, which sounds like is already your plan. Then once you move out, you can rent out the room you were living in, which will increase your cash flow. And then can rinse and repeat, building your portfolio while living for cheap/free!
Here’s a link to a thread where I gave a more detailed example of this. 
Feel free to reach out if you’re ever interested in learning more, and there’s ZERO pressure on the agent front, I see you and your aunt have got that figured out. I just am passionate on the topic!

Thanks @Stuart Grazier! A little creativity can go a long way in the house hack space.

Regarding areas where non-occupied Airbnb would be appropriate as a backup plan for house-hacking (or in general), there are a few areas in the Denver metro area where this can currently work that I have some familiarity with. I definitely find it easiest, and would recommend, getting the cities on the phone to discuss fine details (zoning, unrelated persons, parking requirements, etc.). But here are some general city overviews other than unincorporated Adams County. All require a permit/license.

I would definitely point you in Arvada's direction, as they've just put updated regulation into place allowing up to three owned properties to be run as short term rentals. I think from a longevity standpoint, Arvada is most secure given they just updated their regulations last month. Here's a link for more on requirements to do so: https://arvada.org/business/permits-and-applications/short-term-rental

Littleton is also an area where non-owner occupant is currently allowed, but there is talk of potential additional regulation. Here's a link for more as well: https://www.littletongov.org/i-want-to-/sample-pages/search?q=Short%20term%20rentals

Englewood is another that offers the possibility of non-owner occupant depending on the zoning, and the ability to request a waiver for zoning requiring primary residence. Link: https://www.englewoodco.gov/government/city-departments/community-development/short-term-rentals

But you're absolutely correct that it's becoming more and more difficult for the non-owner occupied strategy to work around the metro area as more cities add regulation. For the post's longevity's sake, here are some of the other major metro areas where primary residence is required and links for additional info.

Lakewood is primary residence only with a license: https://lakewoodspeaks.org/media/W1siZiIsIjIwMTkvMDIvMTUvMTcvNTAvMjYvM2Y5NTQ1YzItYTJlZS00ZWIwLWJiMzctZGMwNGM2MjYyZmI0L08tMjAxOS0zLnBkZiJdXQ/c80cc5610dd8bae1/O-2019-3.pdf

Aurora is primary residence only with a license: https://www.auroragov.org/residents/water/pay_my_water_bill/landlord_resources/short-term_vs__long-term_rental

Denver is primary residence only with a license: https://www.denvergov.org/content/denvergov/en/denver-business-licensing-center/business-licenses/short-term-rentals.html

Hopefully there's some value here and at least a starting point for some additional research!

Thanks,

Luke

Hey Stuart,

I definitely agree with @Ben Rhodin above, and wanted to add a little color to it with a home I recently analyzed.

I think that one of the main draws of house hacking (other than having low/no housing expenses) is the flexibility it allows the owner. If one runs into a circumstance where they want or need to leave their house hack, that opens up another room/unit for them to rent out, increasing their return/cash flow potential.

In the Denver metro area specifically, cash flow is hard to come by in 2-4 unit residences which is the more “traditional” house hack but can definitely cover a portion of a mortgage doing so. However, cash flow is much easier to come by in the Denver Metro market when someone rents their home by the room.

Here’s an example of a rent by the room situation:

There is a 5 bed, 2 bath home currently on the market in the Thornton area for 375k. I currently have a mortgage quote of my own at a 2.75% rate. Putting a 3.5% down payment down, my PITI is estimated at ~$1,930 inclusive of mortgage insurance.

According to a Facebook Marketplace search, rooms are renting anywhere between $650-$900 in the area depending on the finish, size of room, etc.

For example’s sake I’ll use $700.

Now depending on a person’s comfort to profitability scale, they may decide to rent all or just a couple of the rooms when they live in the home. In the situation you described, all rooms would be available to rent because the owner had to / wanted to move out.

In a perfect world of renting all rooms out 100% of the time, I would be bringing in $3,500 per month, which offers significant cash flow above and beyond my PITI of $1,930.

Obviously the world's not perfect, but I would only need to average 3 bedrooms rented out at $2,100 a month for the year to cover my PITI, and have a few extra dollars for maintenance. Anything above and beyond is added buffer and potential cash flow (and definitely achievable), not to mention principal pay down and tax write offs.

Here's some additional backup plans:

It is definitely recommended to have backup plans going into a house hack investment. For a long term rental, in a quick Zillow search of the same neighborhood, I couldn’t find any 5 bedroom rentals listed. But there is a 4 bedroom townhome at $2000 and a 4 bedroom house for $2100. Assuming a 5 bedroom could land me $2,200-$2,300 this long term rental approach isn't as good as rent by the room, butwould likely allow for break even but i

Another backup plan that was popular prior to the happenings of this year, was to Airbnb a space in the home. This house is located in unincorporated Adams County, so Airbnb is not restricted in the same manner as Denver County. This house has a back door that can be locked off from the main floor (like Ben mentioned above), allowing the basement to serve as a non-conforming second unit which could be “Airbnbed”. Obviously this year’s a tough one for Airbnb, but I just gave it a look for a similar instance. I found two listings for a basement unit in the area, one at $70 and one at $104 per night. If I was able to rent out the basement (2 bedrooms) at $80 a night for 15 nights of the month, that’d be $1,200 a month just for the bottom portion. If I achieved 20+ nights a month, that’d be $1,600+ for just the bottom unit. Coming out of the pandemic, both would be plausible.

In that same manner, you could rent the basement unit out in a long term manner for about $1000 a month, leaving three bedrooms upstairs to rent at ~$1,700 for a long term unit. Total of $2,700 covering the PITI.

I apologize for the long winded post, but just wanted to put it out there that there are definitely ways that would allow the owner to hold onto the unit should they need or want to move out in an expensive market. It’s important and recommended to go into an investment with a backup plan, and obviously it’s important to follow local guidelines/laws (Airbnb, egress windows, etc.), but if one can get creative it’s possible to hang onto their investment and even cash flow with the right deal when the owner leaves the residence.

Hey Thomas!

House hacking is a fantastic way to start!

Regarding your question, BiggerPockets has a great tool for finding recommended real estate agents and various other vendors. if you select “Network” in the drop down, there’s an area where you can search the recommended vendors.

Another way would be to network with a real estate group local to the areas you’re interested in, and get a referral that way from that local network. 

A quick side note I’d throw in here as well, while market price is definitely a factor, there are many ways to house hack in various markets depending on your goals. For example, Denver tends to be on the higher side. If you’re looking to cover a portion of your mortgage, the traditional 2-4 unit still works, but if you’re looking to cover most or all you’d want to rent each room out and can definitely do so.

Good luck on your home search, keep us posted!

Hi Kathleen, you are correct that there are certain instances of "life happens" exceptions that would allow you to not fulfill the FHA occupancy requirements. Here is a link to a good, high-level overview of a few of those items:

https://www.fhaloans.com/artic...

Taking on an FHA loan knowingly not intending to fulfill the occupancy requirements could be considered fraud and end in civil or criminal pursuits, which would likely be the worst case scenario you mentioned above.

Good luck on your home search!