All Forum Posts by: Scott Hibbert

@Karran Gupta If you can refinish like a few people have recommended that would be the easiest and cheapest.  The 2 times I have done shower pans they were set in concrete.  One was a bathroom remodel torn down to the studs and the other was a unfinished basement bathroom addition on a concrete floor, but my guess is that trying to take one out will end up with wall damage.  Good luck!

I have been researching rent prices in Denver(Primarily west of 25) and it seems like listing are staying on Craigslist, Zillow, and Facebook marketplace for quite some time.  I'm not sure if this is just seasonal or if this is going to become the new norm along with increase in vacancy rates while it takes more time to fill rentals.  I am currently under contract on a single family 4/3 in Lakewood that I plan to house hack that also needs updating. I have been lowering my expected rents based on the competition I am seeing.  I am also asking myself about the chance of rent and value depreciation on this house over the next 2 years and if it is still a smart purchase while I have time to walk away from it.  I still have positive long term outlook on the Denver real estate market.

Some background: I moved here from Oakland in May 2019 and found a room for rent in Wheat Ridge for $900/month +utilities in a 3bed/3bath SFR with key amenities I was looking for that include private bath, garage for my motorcycles and storage bins and easy street parking for my truck. Without going crazy, it seemed like the best option at the time. Now as we enter January 2020, I am unsure if the room I rent could command $900/month. I will need to sublet my room if/when I move out to finish my 1 year lease.

I have always been curious if Denver rents and home values will be negatively affected by all of the new build, higher density, apartment buildings, condos/townhomes/modern 4plex/duplexes that are taking over Denver and more specifically the areas I in interested in living that include Highlands to east Wheat Ridge, Sloan Lake, Villa Park, anywhere along the light rail, West Colfax areas, etc.

I am now seeing room for rent at $1200/month or less for a private room and private bath in some of these new builds on craigslist.  My guess is people are trying to subsidize some of their mortgage and still pay $1500-$2000/month themselves but not aggressively house hack mortgage free. I also reading articles about the new apartment buildings offering better concessions to get people to move in sooner.

One article says that projections starting in January 2019 for the next 30 months Denver should have 30,000 new apartments available.  I am still seeing a ton of new construction in various phases of completion as we end 2019.

I have read a number of articles online and pulled a couple quotes and links below.  Let me know your thoughts and if you have any strategies for your rentals.  

Are you planning for rent depreciation when you run your numbers?  

Looking forward to hearing everyones input!

https://www.denverpost.com/2019/12/04/denver-rent-growth-slowing/

"In its most recent Denver Rent Report, Apartment List tracked a 0.1% decline in median rents for Denver proper from October to November. The median rate for a one-bedroom last month was $1,069 and a median two-bedroom was renting for $1,353 per month.  It’s the third straight month of declines after the peak summer rental season."

"Denver rents have risen 0.7% since November 2018. In Colorado as a whole, rents have risen 1.6% on average over that same period and nationally average rent has risen 1.4%, according to Apartment List. Denver’s rent increases are trailing the rate of inflation in the metro area, which the U.S. Bureau of Labor Statistics tracked at 2.7% year-over-year in October."

https://denverluxuryrentals.com/blog/17646/Is-the-Denver-Rental-Market-Going-to-Bust-Statistics-and-Other-Important-Information-For-Your-Investment-Property-

• - Denver is 2nd Largest in Apartment building construction, per capita in the U.S.
• - In 2017, 13,348 apartments came onto the market
• - In 2018, the first three quarters delivered 8,448 units in the Denver metro area. There is a delay due to construction backups.
• - In 2019, projections call for 30,000 apartments over the next 30 months.
• - 33% of apartments communities are high-end buildings.
• - 1 out of 7 downtown units come with the concession of one-month free rent
• - Average apartment and privately owned rental rates have decreased the 3rd Quarter

https://www.financialsamurai.com/time-to-start-worrying-about-the-housing-market-again/

I think this whole article is interesting but here's a quote anyways

"Things To Know Before Buying Property Now

1) Rents have softened from peak levels in many of the most expensive cities. Given property prices are a function of rental income multiples, a real estate buyer should be looking to buy at similar pricing discounts from peak rental periods. For example, research whatever comparable New York property you want to buy today that was sold for in March 2016 and aim to buy at a 14.8% discount to the March 2016 price because that’s how much rent prices are down.

In 2017 I experienced softening rents first hand when I tried to find replacement tenants for my SF rental house at a similar rent of $9,000 a month. After 45 days of aggressive marketing, I only got two offers, both for $7,500 (-16.7%). I even hired a rental listing agent for two weeks to find people for at least $8,000 and he failed. As a result, I sold. Pricing pressure starts at the most expensive markets and works its way down. The large supply of condos in many expensive cities has really put a damper on rents and housing prices."

@Kevin Grasse good luck with your inspections!

Since you said it’s a fixer upper with deferred maintenance, I’m curious if you plan to renovate yourself or contract it out? Do you plan on having roommates while the renovations are happening? This is something I haven’t figured out for my own house hack.

@David Chen Everyone is different so I don't want to tell you what to do.  What is your 2-5 year plan for this property?  Do you plan on living in it for a few years?  Do you plan on moving out after a year or 2 and turning it into a full time rental or do you plan on selling it?

I have been running my numbers based on what rent would be if I don't live there.  I have made an assumption that I will probably get more cashflow per month as room for rent vs the whole unit.  So again it depends on what your future plan is for this specific property?

My goal is to live in my house hack for 1 year ideally and then move on to another house hack and convert the first one to a full rental.  The new builds appeal to me in this way because I don't need to do any work on it.  I would just live in it and collect rent for the other rooms.

@David Chen How has your search been going?  I looked at a few new build options in the West Line Village community near the Sheridan light rail station south of Colfax.  I couldn't get the numbers to work on what they are calling a 3 bed 3 bath townhouse.  The 3rd bedroom is a joke and even the regular bedrooms are small.  I've noticed a lot of this happening with the new builds near Sloan Lake.  The bedrooms are small and the 3rd or 4th bedroom wouldn't function as a bedroom in a room for rent scenario.

@Marston Garceau I second @Matt M. on renting for 6 months first and getting a lay of the land.  I lived in Boulder 2 years ago before moving to Oakland and now back to Denver.  I have been renting for 6 months and have discovered so many pockets of the city that I would have never considered living before.  I am now ready to buy and feel much more confident about the locations I am looking at.  As someone who hates commuting, Fort Collins and Denver are really far apart and would not be a fun commute if you end up working in one and living in another.

@David Chen As someone who is also looking to purchase a single family house hack in West Denver, I'll give you my perspective.

First of all.  The 50% and 1% rules of thumb are no longer relevant in Denver in my opinion.  I'm guessing they were accurate in 2013-14 but price appreciation and minimum rent appreciation has changed everything.

I currently rent a room in Wheat Ridge for $900/month plus utilities. Do you currently pay rent? The reason I ask is because I think if you can buy a property and reduce your effective "rent". Then the property might make sense. For example if I buy a 3 bedroom 3 bathroom house and rent out 2 rooms for $900 each plus utilities and my mortgage (PITI) is $2600. Then my effective rent is $700 a month which is cheaper than my rent. It gets more complicated when you include the value of your downpayment, closing costs, any unforeseen repairs, vacancies, etc. but it is something I look at for a quick analysis.

About the specific location.  I agree it is still turning over but I have a positive long term outlook.  I'm sure your real estate agent knows more about this than I do, but one of my concerns in that area is there is so much construction of very similar properties that your potential tenants/roommates will have plenty to choose from over the next 2 years as more buildings are completed closer to sloan's lake and the amenities that surround it.  Will that reduce your potential rents and not increase them over the next couple years?

I agree with @James Carlson about finding less expensive options a little further out if that is something you would consider.  It's definitely a trade-off that I battle with every time I see a potential property pop up.  I want to live with close proximity to my job and going out with friends and am willing to pay more for it.

If you only have a 3% downpayment, will you be able to cover vacancies and repairs(still happen with brand new buildings).  Assuming the negative cash flow, how will you build your reserves month over month and your next downpayment for your next property.

I personal won't buy a property that will be cash flow negative when I no longer live there. I don't bank on appreciation, especially with all talk about a recession at some point in the future. It's a nice to have but if you are long term buy and hold, appreciation won't help until it removes PMI which will be years.

Best of luck in your search and maybe I'll see you at a meetup.

@Micah Ng it really depends on your local rules. First step would be to find out if the property is considered historic or if it is just in the historic part of town. This can be done either on the local government website that manages building permits or by visiting them in person.

They should be able to answer all of your questions specific to the property.

@Micah Ng

Historic could mean that your renovations must meet the guidelines of the city rules. For example they probably won’t let you add on a super modern addition that doesn’t match the style of the historic neighborhood. They will want to keep the character of the house the same.

@Nathan Killebrew Stick to your goals.  Avoid distractions and turn your learning into action sooner than later.

I am 36 with one rental property and wish I took action on the knowledge I had when I was in my early 20's.

Also, know that nothing changes as you get older.  Those same college students that are your friends today become my corporate co-workers who are living paycheck to paycheck and are now in their early 30's and don't want to talk about real estate, savings or financial freedom.

Learn to know your audience and not talk too much about stuff they aren't interested in.  They will learn when they SEE your success but not from talking about future hypothetical scenarios.

There is a large majority of people who spend thousands to hundreds of thousands of dollars and years of their lives on college degrees and MBA's but zero time learning on how to manage the hard earned money because it's too boring or they are too tired after working all day.  Don't be one of them.

Go to local meetups like the others have already recommended and make new friends there.