House Hacking In Denver for Less than $5,000 Down (Not a VA Loan!)
Our guests for this podcast are couple Dianna and Will who realized they weren’t happy with the path they were on in California and decided to make some major changes in their lives. After learning about various concepts of financial independence, they saw that real estate investment would help them meet their long-term goals of wealth building. Thanks to a special grant program, they were able to purchase a property to start their house hacking journey for under $5K down. Listen to the podcast to hear their agent Lauren Valinoti review the numbers that show they are poised for some of the best returns we’ve seen on the show.
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  1. Listen to the podcast “#274: House Hacking In Denver for Less than $5,000 Down (Not a VA Loan!)” on the Denver Real Estate Investing Podcast
  2. Watch the YouTube video (at the bottom.)
  3. Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.

Is there another way to gain financial independence? 

Dianna and Will met in college, started dating, and were lucky to land their dream jobs after graduation.  But after a few years of living the life they thought they wanted, they realized they were both unhappy.  The idea of continuing down that path forever made them miserable, so they started researching other methods of long-term wealth building. 

Denver house hackers Will Talty and Dianna Dawson

Will started watching videos on YouTube about financial independence, which eventually led him to real estate investing.  He became dead set on house hacking, renting out part of the house they owned which would allow them to essentially live for free.  He and Dianna sat down together, mapped out their goals and plans, and decided what steps they needed to take to meet those objectives.  The market in California is expensive for a couple just starting out, so they looked at other states that would allow them to both live an outdoorsy lifestyle and start investing in real estate.  

They settled on Colorado, and soon Will got a job in Denver.  Within two months of deciding they would make a plan to change their lives, they were moving from coastal California to the Denver suburbs.  Even though they moved two weeks before COVID shut everything down, they were able to fulfill their goals of camping, hiking, and enjoying the outdoors.  One of the great benefits of living in Denver is that even during a once in a lifetime pandemic, there are still opportunities to get out into nature and have a great lifestyle. After getting settled in and learning about the local real estate scene through Envision Advisors’ podcasts and books, they were ready to reach out to us and start their house hacking journey. 

Finding the Right House Hack in a Tough Market

Most of what Will had learned about house hacking involved buying a duplex or triplex and renting out the separate living areas.  In the Denver market, these types of properties are highly competitive and it wouldn’t be feasible to buy at their price point.  Will started looking at the room by room method, in which they would rent out the extra bedrooms in a single family home.  Dianna initially objected to this, since she felt they were out of the roommate stage of life.  But once Will showed her a spreadsheet with what kind of returns they could make, she quickly changed her mind.  

They started looking at different types of homes and areas to get an idea of what would best meet their needs.  New builds would allow them to break even, but they wanted cashflow.  They settled on finding an older home that they could fix up themselves.  Will is handy and enjoys house projects, so this was a good fit for them.  A house with more bedrooms than they wanted to rent out would give them flexibility, as well.  

Tips for Finding the Right Investment Property for You

An older home can be a good move for investors.  It’s important to make sure the house has good bones and has been well-maintained by the previous owner.  While taking Will and Dianna to look at homes, I made sure to be thorough during the walkthrough, looking for anything that could be a sign of bigger, underlying issues. 

When looking for an investment property—even one you plan to live in—it’s best to take an analytical view.  Remember that this won’t be your forever home: you are looking for a property that renters will want to live in and that will help you meet your long-term goals.  It can be hard to keep emotions out of the home buying process, especially if this is your first property and the most expensive thing you’ve purchased so far.  I try to keep clients focused on the big picture of how the home will benefit them in the long run.  Dianna and Will trained themselves to emotionally disconnect from their home search and look at which homes would bring the returns they wanted.

The House

Will and Dianna found a five bedroom two bathroom house in Aurora.  Three of the bedrooms and one bathroom are on the main floor, while the basement has two bedrooms and a bathroom.  The basement setup is ideal for renters: it has a private entrance, each bedroom has its own living room attached, and access to the kitchen on the main floor is through a hallway that doesn’t enter into Will and Dianna’s living space.  They plan on adding a kitchenette in the basement for extra convenience, as well as expanding the amount of cabinet space in the main kitchen.  

The house is located near the Fitzsimmons Army Medical Center and light rail station and is in a friendly, quiet community.  This is a great area for renters because the proximity to the hospital system is perfect for medical students and traveling nurses on a 90 day rotation.   Both tend to make great tenants, since they are usually focused on their work and will keep the property in good shape.  The home had previously been owned by a company who rented it out, so the neighbors were comfortable with the idea of the house being used in this way.

The Deal 

The house was listed for $330K, but based on the market trends, we came in with a strong offer of $350K.  I built a good rapport with the agent and sold her on the story of my clients.  Unfortunately, the sellers also received two other all-cash offers, also at $350K, and went with one of them.  Luckily for Dianna and Will, though, the first deal fell through.  The agent called to see if they were still interested in the home, and we acted quickly to get under contract.

Will and Dianna were able to take advantage of the Bank of America grant program to help finance this property.  There are two separate grants in this program that can be used toward down payment and closing costs.  To qualify, you need to make under $150K a year, and you have to buy in an area determined to be moderate or lower income track.  The amount you receive will be on a sliding scale based on income and location.  By using this program, Will and Dianna received $10K toward their down payment and $7500 in closing costs that they do not have to pay back.  

Spreadsheet Analysis

Aurora house hack Deal Analysis spreadsheet

A home inspection found an active leak in the upstairs bathroom and high radon.  The sellers fixed the leak and ended up putting in a new sewer line.  They also gave Will and Dianna a credit to cover half the cost of a new radon system.  

Between the credit and grant program, Dianna and Will’s all-in cost was $4500, and they even received a check at closing.  Using this program allowed them to keep about 80% of their capital, which was a huge relief.  They were able to fast track their cashflow goals.  

Property Operating Expenses

Property Operating Expenses analysis spreadsheet Aurora house hack rental

Thanks to the money they were able to save, they have both an account for monthly reserves and a renovation account.  They are able to fund the initial repairs through the renovation account without having to touch their reserves.  By doing as much as they can now to make the home ready for tenants, they’re hoping they won’t need to dip into their monthly reserves as often as they would otherwise.  

First Year Returns

First year returns spreadsheet Aurora house hack rental

Will and Dianna are looking at great returns on this property.  Even with their conservative vacancy and rental income inputs, their 366% cash on cash return is among the highest we’ve seen.  With just the rent they will collect after they move out in the next one to two years, one of them could retire within a decade.  

Conclusion 

While this may have been a once in a lifetime deal, they are setting themselves up to be able to purchase their next home.  Eventually, they’d like for both of them to quit their jobs and focus on real estate full time.  Dianna may have resisted the idea of room by room house hacking at first, but these returns show that even a few years of this lifestyle have the potential to completely reshape the future. 

If you’d like to reach out to Dianna and Will, Dianna is active on Instagram and they are both on LinkedIn (Dianna, Will).

You will be seeing a lot more of Dianna, since she just started as Envision Advisors’ new social media manager.  She encourages everyone to connect with us on Instagram, LinkedIn, and especially YouTube.

If you’d like more information on the Denver market in general or the Bank of America grant program, you can reach me at lauren@envisionrea.com or 720-815-8351. For information on what house hacking is and how to get started, check out our free Ultimate House Hacking Guide.

YouTube Video: House Hacking In Denver for Less than $5,000 Down

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Lauren Valinoti
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