RESIDENTAL MULTI-FAMILY INVESTING IN DENVER

Residential multi-family investing refers to a type of residential property that contains two or more units, typically in the form of apartments or condominiums.

Duplexes and triplexes are ideal properties for investors who want to house hack. It can be best of all worlds by having your personal space while getting rental income from your primary residence.

Residential multi-family properties are great units for risk adverse investors as you can have multiple income streams from one unit.

The Benefits of Residential Multi-Family

Consistent cash flow, diversified through multiple rental units.

Cash Flow - Multi-family properties can generate significant monthly rental income, providing steady cash flow for investors.
Lower Vacancy Rates - Multi-family properties typically have lower vacancy rates than single-family homes because they offer more affordable housing options for tenants.
Economies of Scale - Owning multiple units in one property can provide economies of scale in terms of maintenance, repairs and management. This can reduce expenses and increase profitability.

Appreciation Potential - Multi-family properties can appreciate in value over time, providing investors with a potential long-term return on investment.
Diversification - Owning a multi-family property provides diversification within a real estate portfolio, spreading out risk across multiple units and tenants.
Tax Benefits - Owning a multi-family property can provide investors with tax benefits, including deductions for expenses such as property taxes, insurance and repairs.

The Drawbacks and Risks to Multi-Family Investments:

Market saturation risk – Investing in a market that is oversaturated with multi-family properties can result in increased competition, decreased occupancy rates and lower rental income.
Management risk - Managing a multi-family property can be time-consuming and require additional expenses for a property management services if the investor doesn't have the time or experience to manage multiple units and tenants.

Tenant risk– Renting out a multi-family properties come with the risk of tenant turnover, late or missed payments and property damage. More renters increases the risks (but also rewards).
Regulatory risk - Residental multi-family units are subject to various legal and regulatory requirements such as landlord-tenant regulations and local zoning laws.

RESIDENTAL MULTI-FAMILY CASE STUDY

Duplex in Sloans Lake

6 Bed 6 Bath
2,134 sq/ft
Purchase Price: $630,000
Cash Flow: $983/month
CoC Return: 4.41%
NWROI: 90.27%

Turning a Single Family into a Multi-Family

There are two ways to obtain a multi-family investment. Buy an structure that is currently setup with multiple units or turn a single family home into a multi-family home. If you’re buying an existing multi-family unit, make sure the unit is properly zoned. If you want to reconfigure a single family home to multi-family, make sure you’re looking in the right neighborhoods.

In Denver, R-2 zoning districts allow for low-density multifamily units. These districts are typically located in residential areas that are primarily characterized by single-family homes. The two zoning districts to look at properties in are the R-2-A and R-2-B, this will give you the most flexibility to convert an existing property into a multi-family rental and increase your ability to cashflow on the unit.

R-2-A: This district allows for single-family homes and two-family dwellings, such as duplexes and townhomes.

R-2-B: This district allows for single-family homes and two-family dwellings, as well as accessory dwelling units (ADUs) and small-scale multifamily buildings with up to four units.

It’s important to note that the specific regulations and requirements for each R-2 district can vary, so it’s essential to check the Denver Zoning Code and consult with local officials before developing or investing in a property in one of these districts.

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