2024 House Hacking Trends in Colorado
Chris, Troy and Jeff dive into the 2024 House Hacking Trends in Colorado, offering detailed insights into property trends in Colorado Springs.

Executive Summary:

  • Supply of House Hack properties has followed the market and remained low.
  • Cash flow is much harder to find in today’s market due to high interest rates and home prices remaining flat.
  • If you’re waiting for interest rates to come down, you will lose time in the market.
  • Demand rebound – if rates drop below 6%, it will be 2021-2022 demand all over again with competition for every property simultaneously hurting first-time house hackers. 
  • Reducing housing costs is a realistic goal while living in a rental property, but cash flow is still possible after moving out with the right house hack property.
  • Lending options are better than ever for house hackers.

Creative strategies still work in today’s market because the demand is still there. House Hackers can still live for free or reduced housing costs even with higher interest rates and high purchase prices.

House Hackers are finding ways to maximize their income through three ways:

  1. Finding a 2-4 unit property and living in one unit while renting out the other unit(s).
  2. Finding a large single family renting out by the room: more rooms = more rent.
  3. Finding a property with a separate entrance and renting short-term or mid-term depending on the municipality.

House Hacking is a get-rich-slow technique that will get you toward your goal depending on your risk profile. It’s worth being temporarily uncomfortable for a few years to be comfortable for the rest of your life!

What’s Not Working In Denver

  • Traditional long-term buy-and-hold rentals to long-term market tenants.
  • Cash-flowing deals in popular neighborhoods.
  • Cash-flowing deals with just one strategy.
  • Expecting cash flow while living in the property without sacrifice.

Deal #1: Single Family House Hack w/ Rent By Room Strategy

  • Closed: Q4 2023
  • Before: 5 bed / 2 bath
  • After: 8 bed/ 3 bath
  • Purchase Price: $520,000
  • Interest Rate: 7.625%
  • Purchase Price: $520,000 
  • Appraised Value: $532,000
  • First Loan Amount: $510,581
  • Second Loan Amount: $20,423 (0% int, No pmt)
  • Seller Credits: $18,000 (6k cc & 12k imp)
  • Deposit on contract: $5,000
  • Deposit refunded at closing: $2000
  • Seller-paid home improvements: $12,000
  • Net buyer cost: $9,000

Projected Monthly Income After Moving Out

  • Room w/ private bath: $900/m 
  • Room w/ shared bath: $850/m
  • Basement rooms: $725/m & $800/m
  • Garage storage: $100/m
  • Cash Flow: $18,180/year
  • Utilities included

Projected Monthly Income While Living There

  • Live for free plus some

Projected Monthly Income After Moving Out

Updates on Lending Guidelines 2024

  • NEW 5% down payment owner-occupied multi-unit homes with Fannie Mae and Freddie Mac loan programs.
  • Changes to requirements for rental income to be utilized on departure residents.
  • Getting pre-approved is still the biggest key to a successful home purchase.

New 5% Down Multi-family Loan

  • New 5% down payment for owner-occupied multi-unit homes with Fannie Mae and Freddie Mac loan programs.
  • Opening doors that were previously limited to FHA and VA loan programs.
  • Rental income from additional units helps borrowers to qualify for more than what they would with a single-family home.
  • Reserve requirements are needed.
  • The remainder of the underwriting guidelines are typical of what they have been previously.

Deal #2: 4-unit Multi-Family House Hack w/ 5% down conventional loan

Overview: The client was looking for the best situation for him and his wife to start house hacking, and the client was open to 2-4 units, so that they would have their own unit to themselves while renting out the other units, and they were pre-approved for $600- $1 million for 2-4 units.

Investor Profile:

  • Investor couple with one townhome.
    • Wasn’t a house hack.
  • Wanted to purchase a new house hack in 2023.
  • Looked at 2-4 units to get privacy while house hacking.
  • Open to most locations in the Denver metro.
  • Wanted a fourplex.

Investment Property Details: 

  • Type:  Fourplex Multifamily property
  • Config: 4 units – 2 bedrooms and 1 bathroom per unit – 8 beds/ 4 baths total
  • Location: Arvada, CO
  • List Price: 800,000
  • Over Asking Price: 810,000
  • Concession: 10,000 to buy down the rate and pay off closing costs
  • Why we like it:
    • 5% Conventional Loan.
    • 10k Seller Credit to buy down the interest rate.
    • A new roof from the inspection to lower annual property insurance.
    • 2 out of 4 leases were MTM, so there’s flexibility with one unit vacant and one, one-term lease that ends next year, it gives time to work with existing MTM tenants and plan for next year’s tenant.
    • Arvada location is close to Costco and Wadsworth Blvd, meaning easy access to highways and major streets.

House Hack While Living There:

Conclusion:

  • It appears to be a negative cash-flowing property.
  • Paying $2,435 per month to learn to be a self-manager and stabilize the property.
  • The business plan to is work to increase the other two units to Section 8 market rents in the next 3-6 months or soon.

Rental Analysis After Moving Out:

Conclusion:

  • This is why you look at both living there and after moving out for house hack properties.
  • This deal is amazing by all metrics by switching to Section 8 rentals.
  • Cash on Cash return is way above average.
  • This deal works great as a house hack because you get your own unit.

Value-Add Duplex w/ 5% down conventional

Overview: The Client was looking for the best situation for him to start house hacking, and the client was open to 2-4 units, so that he would have his own unit to himself while renting out the other units and rooms to maximize cash flow, and he was pre-approved for $600k- $1 Million for 2-4 units.

Investor Profile:

  • First-time investor with solid W2 income.
    • It wasn’t a house hack
  • Looking at 2-4 units to get privacy and house hack.
  • Open to most locations in the Denver metro.

Investment Property Details: 

  • Type: Duplex Multifamily property
  • Config: 2 units – 4 bedrooms and 2 bathrooms per unit – 6 beds/ 4 baths total
  • Location: Aurora, CO
  • List Price: 640,000
  • Over Asking Price: 660,000
  • Concessions: None
  • Why we like it:
    • 5% Conventional Loan.
    • It’s easier to add another bedroom to each unit because of the large square footage.
    • Six months remaining on the market lease and an empty unit to move in.
    • The Aurora location is close to public transportation, major highways, and retail/restaurants.

House Hack While Living There:

Conclusion:

  • Need to add one bedroom per side by converting the dining room into a bedroom.
  • It appears to be a negative cash-flowing property but breaks even.
    • But that is with 3 roommates at $800/room.
    • At a 6.75% interest rate.
    • Almost living for free in a nice side-by-side duplex.
  • The other side rented at below market rents at $2600 per month.
  • The business plan is work to live there for one year and then turnover the tenant to Section 8 from $2,600 market tenant rent to $3,255 Section 8 rents.

House Hack While Living There After Turning Over One Tenant:

Conclusion:

  • After turning over to the Section 8 tenant, it will improve cash flow by over $500 per month.
  • House Hacker will get paid $500 per month to live on one side of a duplex with 3 roommates.
  • It is still possible to cash flow while housing hacking, but you need to find one that can have extra bedrooms.
  • After moving out, the cash flow will increase.

House Hack After Moving Out One Year Later:

Conclusion:

  • Because of the 3-bedroom to a 4-bedroom unit conversion on each side, Section 8 will pay over $3,255 per month per side.
    • Market rents are closer to 2500-2600 per month.
    • Over $700-$800 premium.
    • Getting Class A rents with Class B/C properties.
  • Amazing Cash on Cash return and living for free in the first year.

Requirement Changes-Departure Residents

  • Documentation requirements have tightened for rental income to be utilized on departure residents (turning the current primary into an investment property to buy a new primary).
  • The first month’s rent plus a deposit on the rental agreement is needed.
  • Executed lease agreement for 12 months.

Get Pre-Approved!

  • Getting pre-approved is still key to a successful home purchase!
  • Analysis of credit, income, and assets to understand borrower capabilities BEFORE shopping.
  • Optimize your credit score to improve mortgage pricing and mortgage insurance costs.
  • Perform an income analysis to maximize purchasing power + accurately calculate any variable income.

Why Get Pre-Approved?

  • Multiple property ownership is thoroughly analyzed to determine if properties help or add to debt-to-income ratio calculations.
  • Asset review and analysis to make sure sufficient funds are available + optimizing for future house hacking goals and objectives.
  • The buy box is better understood.
  • Discuss lending strategies in order to achieve house hacking goals from the first home being purchased to subsequent homes.

Need Help Putting Together a Business Plan?

Schedule a FREE consultation!

  • Strategy Call
  • House Hack Stack Optimization with Property Llama

Who is Nova Home Loans?

For over 40 years, we’ve been focused on helping homeowners find the perfect loan to fit their financial needs and personal goals. Working with NOVA is a personalized experience from initial application to final loan closing and beyond. We will be with you every step of the way toward successful homeownership. Start working with NOVA & Troy Howell today!

NOVA FINANCIAL & INVESTMENT CORPORATION, DBA NOVA HOME LOANS NMLS 3087/ EQUAL HOUSING OPPORTUNITY/8055 EAST TUFTS AVENUE, SUITE 101/DENVER, CO

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Authors
Chris Lopez
Chris Lopez is a Denver area real estate entrepreneur and investor, as well as the host of Bigger Pockets’ House Hackerz and the Denver Real Estate Investing Podcast.
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