Thornton, CO

Topics for Investors: Basement Kitchens

You walk into a property you're looking to buy and rent and you walk down into the basement and voila! you find a full second kitchen. Great! You start calculating how much rent you could get if you could rent the downstairs separate from the upstairs and the cashflow is out of this world! But wait, there are a number of very real problems with this scenario.

First of all, it's illegal unless the property is zoned for more than one tenant and the property has been converted to non-residential use. But there are even more practical reasons why having two separate tenants is often not a great idea. The first is the utilities. Since it's a house there will only be one bill for Excel and water. Who's going to pay it? Can you really get the tenants to pro-rate their share if you pay it? Good luck. Or do you just pay it, figuring the extra rent will more than offset paying the utilities? Maybe, but what you'll find is that when a tenant is not paying the utilities they have the heat at 90 degrees all winter and every time you go to the house the kitchen sink is running.

Your great cashflow gets eaten up by outrageous utility bills and you're back where you started. For these reasons and many more I suggest you don't try to put two tenants into a property made for one. But that doesn't mean the second kitchen has no value. It might be useful for an extended family who needs the extra space kitchen and might actually command a larger rent. Check with your local building department and your insurance agent though, to make sure it's acceptable to have a basement kitchen in the first place.

Update: For a current list of Homestead Hills Thornton Colorado homes for Sale this will give you an interactive map of the community.

Quail Valley

Quail Valley is a community that is very close to the 'action' in the north corridor of Thornton.  Located just north of 144th Avenue and the Wadley Farms neighborhood.  The homes in Quail Valley range from modest size 1800 sq ft up to over 3000+.  One thing they all share are large lots!  Also the neighborhood is just east of I-25 and is very close with easy access to The Orchard shopping center.  Super Target and King Soopers grocery stores are close and even making a quick trip up to the Larkridge shopping center is only about five minutes.  The School district is Adams 12, and since both Silver Creek elementary and Rocky Top middle school are so close, many of the kids can easily walk to school.  We are very familiar with these homes and neighborhood and have specialized in selling and helping people buy here.

If you are looking for a large lot, newer home with quick access to I-25, shopping and schools, we'd love to help you sell or buy your home in the Quail Valley neighborhood in Thornton.

Your Thornton Colorado Real Estate Broker, Stuart Dobson.

Northbrook

The neighborhood of Northbrook in Thornton is laid out mostly in a grid pattern that is easy to navigate and find your way around.  Located just north of Horizon high school and bounded on the west by Holly Street, it is a quiet neighborhood of homes built in the late 90's and early 2000's.  Many of the homes have fair sized mature trees and landscaping with decent sized lots relative to the houses.  The streets have sidewalks on both sides and are wide enough that two cars can pass get by each other if there happens to be a car parked on the street.

Some of the homes have mountain or city views but it is generally from an angle in the backyards or from the front porch.  The school system is the Adams 12 district and high school students can walk to Horizon through the neighborhood.  We are very familiar with these homes and neighborhood and have specialized in selling and helping people buy here.

We'd love to help you sell or buy your home in the Northbrook neighborhood in Thornton.

Your Thornton Colorado Real Estate Broker, Stuart Dobson.

Investor often ask me what types of real estate investments are available on the market. Here's what we tell them.

This is the first of several postings on the topic.

Please offer comments - positive or negative!

Assignments. If you don't have much equity to work with, and/or if your credit power is limited, assignments can be a way to get started in real estate investing. You will need to have a strong "sales" personality to succeed at it, though.

Rental Condo or Rental Home. Purchase of a residential property to be rented out to tenants, usually on a 6-12 month lease term. This is how most new landlords get started. You can hire out all of the property management functions, but in many cases you will do many of them on your own. There are smaller down payment requirements than for larger rental buildings. The purchase process and financing process is very similar to what you experienced buying the home you live in now. It's a great way for beginners to get started.

Small (2-4 units) Apartment Building. Purchase of duplex, triplex or quadplex to be rented to tenants, usually for 6-12 month terms. Usually what the rental home / condo landlords graduate to. In most markets they cost a little more than a rental home, but are much more likely to cash flow on the average month. Less cash flow risk; if one unit is empty you have other tenants that still help you with the mortgage payment so it doesn't all come out of your pocket. Many owners will start to delegate some of the property management tasks to an on-site assistant (typically the most responsible tenant), such as yard maintenance and showing empty units. The financing process is only slightly more involved than a residential loan. Relatively small down payment requirements make it affordable. The purchase process is also very similar to purchasing a home. It's a good way for beginners to get started.

Large (5+ unit) Apartment Building. Still targeting tenants for 6-12 months at a time, buildings with more than five units are considered "commercial" property. The loans are more difficult to qualify for, and usually a larger down payment is needed. Uncommon for the new investor; this is usually what landlords with several years of experience "trade up" to. Cash flows on larger buildings are more stable than for smaller buildings, and the economies of scale make it practical (and desirable) to hire a property manager to take over most the work for you. This takes reduces the hassle factor of the landlord process.

Lease Options. Again you are seeking a tenant for a property, but usually for a slightly longer term (12-18 months) and frequently (though not always) with the goal that the tenant purchase the property from you at the end of the lease. If you purchase the property, then it's an easier process; if you find a highly motivated seller to let you re-lease the property to another tenant, it can be a lot of work to set up. However, the re-lease method doesn't require any cash out of pocket and does not rely on your credit score, so it is appealing to many investors. Great for beginners with the right skills and attitude.

Fix and Flips. Purchasing a home that needs work. The scope can range from the basic "paint and carpet" to extensive overhauls to scraping a decrepit property and completely starting over. Usually does not involve tenants, and the objective is to get in and out of the property as quickly as possible. Great for beginners with the right skill sets or the willingness to learn.

Conversion of Apartments into Condos. A synthesis of the fix and flip and rental operations - purchasing an apartment building in a neighborhood dominated by owner occupants, then converting the building from apartment building to condominium. Often requires renovation of the units to meet the expectations of owner-occupant buyers in that area. Complex and time consuming, but has wonderful tax advantages compares to fix and flips and often has superior returns to all other asset classes. Ideally suited for the sophisticated investor with extensive experience.

Scrapes, Pops and New Construction. Purchasing a small home in an expensive neighborhood that may or may not need work. The home is bulldozed and a new home or duplex is put on the lot. Alternatively, the existing home is renovated and more square footage is added on. A pop-top is adding a second story to an existing home to add more square footage (commonly, a master bedroom suite).

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Contact me at northpeakREI@comcast.net for more info.