All Forum Posts by: Tyler Hardy

@Chris Lopez — Thanks for the clarification.  That makes a lot more sense!  I appreciate you taking the time to review the notes.  I'll check in with Vern!

@Tanner Crawley — Thanks, I believe so too. Costing on them can be expensive. To that end, I've learned how to navigate the contractor market in Denver. Yes prices are higher, but the average prices are inflated from out-of-state cash-rich high-income earners who don't flinch when someone quotes them $9,000 to install a French door (that's what I was recently quoted, if you can believe that). I have been lucky enough to find good work and pricing that isn't silly. I've been quoted $80-130K for a 555sqft ADU with a deck (includes a 24x24 garage with 10x14 work shop).

While the pricing is high — if you have equity or access to a loan, the leverage of the opportunity is phenomenal. A $100,000 HELOC would translate to roughly $550/mo payments with the rates I've seen. If the apartment brings in $1,200 a month (which is well within the market here), you're cash flowing $600ish out of the gate with zero capital investment. COCR is 100%, annual operating income would be $14,400 annually, against $7,000ish in free cash flow. If 100% of the cash was reinvested toward the principal and interest, the ADUs would be paid off in roughly 7 years.

I've run the model on buying other properties for rentals — I have the option to exercise a VA loan if I cash-out-refi on my primary now. But even then the #'s don't make sense, given the price of housing. The buy-in is larger and the rents, while high, are cut down by the HELOC + mortgage cost. Anyways, that's my thought process haha.

I suppose we're talking about two different things and two different cities.   Littleton has issued a wide range of variances under the guise of PDO's (planned development overlays).  If we're discussing Denver, one could point to a lack of common sense regulation/variances to restrict unfettered and harmful development.   Slot homes blew up in Denver, you can see the satellite view below to show how just one small series of city blocks is being inundated by row homes.

There is also the number of permits which showcase just how big development has been in multi-tenant applications:

I know of the developer you're speaking of for Littleton who was told no — if it's the property on Nevada street that was rejected tail end of 2018.  He was asking for multiple variances (height, parking, and set back) and the only reason he wasn't given the go-ahead to build was the city just passed new design standards.  If this is the same guy, he asked (or paid) 15-20 strangers who didn't live in Littleton to come speak in support of the project.  He claimed to be a "community and neighborhood man," meanwhile none of the people bordering the property (myself included) had ever met or seen this guy.  There were sleazy attempts to suggest the property would improve safety by adding a sidewalk to a dangerous section of road (a side street with no traffic that led into an ally way).   Adding to the façade was the attempted argument he was providing "affordable" housing... for 5 units that were easily 650K a piece.  Now the property is sitting there over priced, windows boarded up, yard destroyed, debris outside.... looks awful.  It's easy to see why communities have a bad taste in their mouth with developers and slot homes when that's what they endure.  

The developer next to me is out of state — he felt the only tree on my property was in his way.  So he had his guys trespass my property and cut down a 60' Elm tree in perfectly good health.  It provided me the only shade and privacy I had from the development.  He refused to pay me for damages and I had to sue him.  The other developer behind me felt my driveway would be a great place to park his 20' trailer.  When I'm not home they drive cranes and lifts into my driveway, I've had to install security cameras and call the police (and to be clear, I'm not a grumpy problem-seeking person, I'm mostly relaxed and hey, let people do their thing).   The developer to the West of me installed a porter-potty on my property in my backyard — because it was more convenient and out of the way.  To be quite honest, most the developers I've run into deserve the reputation dished out.

Per the city, you are absolutely right. Density = Tax Dollars. Anyone living in Denver should come to expect development, and I'm no different. I support development, so long as it's planned and retains some inkling of consistency with the existing aesthetics of the neighborhoods. This is why ADU's are such a great option for residents. It's a great compromise that permits density while retaining existing character — it doesn't sideline residents and it typically delivers somewhat affordable housing. I think cities need to expedite the process of removing ADU restrictions.

This article does a great job summing it up:

https://www.strongtowns.org/journal/2018/9/11/if-y...

All very good points, and I appreciate the insight. I hear you're warnings, and it's a reminder to not be naive to the obstacles. It is shocking to me to see the incongruence in restrictions between developers and residents. As many areas in Denver, my neighborhood is being rolled-over by developers scrapping beautiful and historic single family homes (I live in a historic area). The city seems to easily allow 5 ugly slot homes with variances in density, height, parking, and set back, but building a garage on your property as a resident isn't allowed — or it is very difficult. And that's just a garage, not an ADU.

Regulation is a cost that drives inequity as costs are more easily absorbed by cash and time-rich developers than SFH owners.

I am still hopping to proceed — I hope with my house being zoned R-5 and the fact the development next door is 42' high and 68 units, the development behind me is 34' high two high end units (duplex), and 4 houses down to the South they allowed 2 properties to develop 10 slot homes.... that the city would take some of this into context. 

I will keep you posted if I am able to proceed...!

I find those comments surprising Chris — City of Golden allow them, Denver has allowed them in the right zoning.  I've seen a lot of them, and they are on the table with multiple cities (City of Littleton is one of them).  I'm in R5 zoning already — multi-units are allowed on my property.  

Given the amount of awful slot homes and "modern" (*cough* lazy) architecture — I wouldn't say it's easy to do an ADU but I would say the success rate is much higher than 4-5 over the course of 5 years.

I've seen quotes across the board, but for 550sqft and not blowing the bank on ridiculous add-ons, sub 150K isn't unrealistic from the quotes I've received. 

Thanks Kyle. I have roughly 150K in equity in the home of which I would look at utilizing a HELOC to access. Putting that equity to the development (I'm guessing it's around $100K) to generate a cash flow of $1000-1500/month against a $600 HELOC is great exercise of leverage.

Could you share the rough costs you incurred to build out?  Were they net new builds? 

I'm considering building an ADU on my property (I have confirmed the zoning), but was looking for advice and help amongst my peers. Foremost I was looking for reliable contractors, and secondly, any advice from those who are doing or have done this.

Thanks!