So how does a deal happen? Let’s run through this house hack in Denver from the beginning.
This client reached out in early September as they were relocating to Denver for work. Our charge was to find a house hackable home in the $700K or less range with 5+ beds, 3+ bathrooms in south Denver. Ideally, we wanted to find him something over 3,000 square feet so that he could add a couple bedrooms and really cash flow. The client offered up they were willing to accept a less comfortable living situation as long as they had enough space to produce their music. His band has a song with over 400 million plays on Spotify 😉.
He put his full trust in The FI Team to find him a dope property that cash flows and will appreciate nicely. Fast forward 6 weeks and we were at the closing table.
The house is 3,400+ sqft. located on a corner lot on quiet streets in south Denver. As is the house has 5 beds and 4 baths, but plenty of space with three living areas that can be converted into additional bedrooms. The rest of the house is totally turnkey.
This house had a competing offer so we had to be somewhat aggressive on pricing. Knowing that price is important to the seller, but cash in hand is much more important to our buyer, we came in with an offer above what they were asking for, but asked for $15,000 in seller concessions. After further negotiation on inspection, we were able to end with our buyer getting a total of $20,000 in total seller concessions in addition to a handful of other items being fixed.
Here’s what the numbers look like
Listing Price: $675,000
Purchase Price: $690,000
Seller Concessions: $20,000 for a 2/1 buydown and other closing costs
The buyer will be renting-by-the-room and in year one will cashflow ~$900/month and in year two ~$500/month. That’s the benefit of a 2/1 buydown, but the buyer is planning to refinance as soon as they can once rates drop and prices spike.
Also of note, this was the buyer’s first deal and they bought it sight unseen from across the country.
|Down Payment (including closing costs)
|Principal Pay Down
|Cash on Cash Return
Why We Love This Deal
- Corner lots for RBTR are ideal for ample parking close to the house
- 3,000+ sqft. With a living room, family room, and rec room allows for additional bedrooms
- Win-win purchase price by offering above ask, but getting $20K in seller concessions
- One of the best inspection reports we’ve seen, the house was well taken care of
- The 2/1 buydown allows the buyer to make an additional $4,800 in year one
This buyer took action when most people were afraid. Like the famed investor Warren Buffett says, “Be greedy when others are fearful and fearful when other’s are greedy.” That’s why we were able to negotiate and get almost everything we wanted on this deal.
Rather than see the one negative of this home buying environment (high rates), he saw more positives such as: little to no buyer competition and easier negotiations.
Furthermore, we were able to mitigate the high interest rate risk by doing a 2/1 buydown knowing that rates will likely be going down in the next 24 months when my client plans to refinance. When these rates go down, his property price will likely spike and we are hopeful that he’ll even be able to burn off his PMI when he refinances in the next 12-24 months.
If you’re interested in house hacking in Denver here are three next steps to take:
1. Come to a Meetup to connect & learn from other house hackers!
2. Reach out to a member of The FI Team who can coach, guide and mentor you like we did for this client.