Arvada, CO

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.

A lot of investors ask what an egress window is and when one is needed. Technically, it's a window for a room below grade that a municipality has deemed large enough to be safe for exit in case of emergency. While there are some variations, the window needs to be large enough that a firefighter with an oxygen bottle on their back could get in, then carry out an injured person in a fire. Most often, it's associated with a basement bedroom window, making it a legal bedroom. Basement bedrooms without egress windows are illegal. Installing an egress window makes them legal. The confusion is that different cities, counties and agencies have different size requirements and height-above-floor requirements for these windows. Therefore, before you start cutting into the concrete foundation you better make sure you've visited the local building department to get their requirements. In addition, HUD, distributing Section 8 vouchers, also has their own requirements for egress windows. So if you're going to rent to a Section 8 tenant make certain you know what their requirements are. If you don't, you won't get credit for that basement bedroom and get way less rent than you expected - believe me it happens every day. To be honest, there are probably hundreds if not thousands of rentals in Metro Denver that have basement bedrooms without egress windows. In my opinion, this is not only illegal, it's immoral. And if that wasn't enough to discourage you from having one, ask yourself what happens if there is a catastrophic fire and someone dies in your illegal basement bedroom. Not good! For about $1,500 - $2,500 you can get a competent contractor to install an egress window (only one is required per basement bedroom) and sleep better at night.

My agency, Your Castle Real Estate, was just featured in the Denver Post Newspaper with the information below. I have added my comments in parenthesis.

The Denver metro area has been hard-hit by foreclosures, but the reality of the situation is vastly different depending on which neighborhood you live in. (This is true - each neighbhorhood can be very different!)

While numerous reports tell a bleak story of rising foreclosures and flat house prices, an analysis of data from the Multiple Listing Service by Your Castle Real Estate shows some neighborhoods are struggling while others are untouched.

The analysis drills down to the neighborhood level, giving a detailed look at foreclosures and home values.

While the data are available in some form or another to many Realtors, Your Castle's analysis, presented in an interactive map at denverpost.com, (Check this out if you haven't seen it before. It's very cool!) for the first time provides

Neighborhood View

• Explore a detailed interactive map of home prices and other data, across the Metro area.

homeowners with a deeper understanding of what is happening in their neighborhoods.

The data show that neighborhoods where the average home price is less than $250,000 are taking the worst beating, while higher-priced communities remain relatively unscathed.

Housing values metro-area-wide decreased by 1 percent in the first six months of the year; 25 percent of sales in the region were a result of foreclosures, according to Your Castle.

During the first half of the year, there were 19,460 foreclosures started in the state versus 28,435 in all of last year, according to a recent report from the Colorado Division of Housing.

Still, the data compiled by Your Castle show that the story is different from neighborhood to neighborhood.

"When you're looking at a $500,000 house, it's a near-luxury house," said Lon Welsh, Your Castle's managing broker. "It's not the person's first home, and they've got a lot of cash in the bank. They're a lot better insulated from the economy."

A separate analysis conducted earlier this year backs Welsh's point.

According to DataQuick Information Systems, sales of homes priced at more than $1 million increased 22 percent between January and June compared with the same period last year. But sales declined - in some cases drastically - in nearly every other price range, according to DataQuick.

Stapleton and the surrounding neighborhoods are among the strongest examples of variations in the metro Denver market.

At Stapleton, where the average home price is $449,000, just 2 percent of home sales in the last year were either foreclosures or short sales, and values increased 10 percent, according to Your Castle. A short sale occurs when a lender agrees to accept less money than is owed on the property.

But the 4,700-acre master- planned Stapleton community is surrounded by neighborhoods where foreclosures are rampant and values are declining, including Montbello, Northeast Park Hill, East Colfax and Northwest Aurora.

In Montbello, where the average price of a house is $148,000, 72 percent of home sales were either foreclosures or short sales. Homes in the neighborhood declined in value by about 9 percent. About 14 percent of its population lives in poverty.

In Northeast Park Hill, 58 percent of houses sold in the last year were distressed. Home values in the neighborhood, where the average sale price is $150,000, declined 11 percent. About 24 percent of its residents live in poverty, according to the 1990 census.

"A lot of it comes down to jobs and how close to the edge people are," said Charles Roberts, a broker at Your Castle. "People who bought on the low end were probably only one month away from foreclosure from the get-go. They got option (adjustable-rate mortgages) and didn't realize they were going to adjust."

The data on Your Castle's map are valuable to people who are looking to make smart investments, said Jon Terry, managing broker of Realty Professionals of America Inc. Buying in neighborhoods that have about 5 percent appreciation makes sense.

"You want to buy in an area that even during a soft market is still appreciating," he said. "What gets troublesome and, frankly, you don't want, is when it appreciates more than 20 percent. That kind of growth can't be sustained."

Because Your Castle's analysis is based on MLS data, it's more useful to real-estate agents than information found on websites such as Zillow.com, which is based on public records, said Dee Chirafisi of Kentwood City Properties.

"It doesn't take into account when renovations have been done or additions have been made," Chirafisi said. "Public records are old news. It really doesn't adjust for current trends in the neighborhoods."

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

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.

One thing about Arvada, Colorado (an historic town between Denver and Boulder) - it’s criss-crossed by train tracks.  Arvada’s history is intertwined with that of this nation’s rail system.  And whether you love ‘em or hate ‘em, the sound of train horns are a part of life in Arvada.

People who live very close to the tracks tell me they get used to the sound, but not everyone feels the same at midnight or two a.m.!  

The City of Arvada has been working hard to come to the aid of the sleepless - new measures have been approved by the Federal Railroad Administration to create ‘Quiet Zones’, where the routine blowing of the train horn will no longer be required.   The City focused on the Union Pacific tracks that carry an average of 25 trains per day and determined that they’d get the most bang for the buck where the line intersects Pierce Street, Kipling Street, W. 72nd Avenue and Simms Street. 

At the time of this writing, construction had been completed at all but the last named intersection.  There is a 21-day notification period before the blowing of horns will subside. 

This is wonderful news for homeowners located near the tracks.  Even if they enjoy the lonely sound of a train horn, when it’s time to sell the home place those tracks make buyers shy away.  Wise listing agents will point out the fact if a nearby intersection is one of the ‘Quiet Zones’

Click here for my post on Old Town Arvada.

Click here for more about historic Arvada

Click here for Arvada festivals

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