Blog Layout
Make Your Home Part of a Multi-Unit
By Duane Duggan, Realtor, RE/MAX of Boulder
Duane Duggan is an award-winning Realtor and author of the book “Realtor for Life.”
When most people think of buying a home, condos, townhouses, or single-family houses usually come to mind. Someone rarely thinks of buying a duplex, triplex, or a fourplex in an owner-occupied situation. However, it could turn out to be an incredible opportunity for the right person or couple. Here’s why!
Low Down Payment Available With FHA Financing
Typically, when someone buys a 2- to 4- unit as a non-owner-occupied investment, a large down payment is required, usually in the 25- to 30- percent range. This down payment amount usually makes the thought of this impossible for most.
Welcome to FHA owner-occupied financing for 2- to 4- units. If you live in one of the units, you can purchase it with a down payment of 3 ½ % down and closing costs.
Living in a multi-unit may not be everyone’s idea of a long-term dream, forever home, but it is a great way to start a real estate investment portfolio. Due to FHA loan limits, it doesn’t work in all markets.
The FHA loan limits (not purchase price) in Boulder County are as follows:
Duplex $824,450
Triplex $996,550
Fourplex $1,238,500
Loan limits are different from county to county across the country, so be sure to check for the county you are thinking of investing in.
Appreciation
As with any investment, there is no guarantee of gains. In most cases, over time, real estate has gone up in value. Let’s say real estate might go up 3% per year in value. If a first-time homebuyer buys a single-family home for $300,000 and it goes up 3% per year for five years, it has increased in value to $347,782. The increased value amounts to $47,782.
Instead, let’s say the first-time homebuyer purchases a 4-unit for $800,000, and the value goes up 3% for five years, then the value has increased to $927,419. The increased value amounts to $127,419. That amounts to $79,637 more than buying a single-family home. Is there more risk? Sure, the tenants could all move out, and suddenly there is no income from the other units. Having a professional property manager with the other three units can help reduce that risk.
Debt Reduction
Anytime you purchase real estate with a mortgage loan, each month you make a monthly payment, the amount owed on the loan goes down a little bit. Over time, equity continues to build. To make a comparison using the example above over five years, here is how it looks:
A $300,000 purchase of a single-family home or townhome/condo with an FHA loan of $289,500 (without financing mortgage insurance) at 4% will reduce the principal by $27,654. A loan on an $800,000 4-unit would start at $772,000 (without financing mortgage insurance), and the principal would be reduced by $73,745,45. The principal reduction over five years would amount to $46,091 or $18,437 more equity built up than the single-family home example. The actual interest rate at the time of purchase affects these numbers.
Cash flow
The ultimate goal of owning real estate is to provide cash flow to live on. In the early years for the example above, this can be difficult. If you are considering a purchase like this, you need to look at exact numbers with your REALTOR®, mortgage, and tax professionals. You would need to compare your monthly outflow of cash buying a single-family home compared to what cash flow would look like if you purchased a 4 unit for living in one unit and renting out the other three units. Let’s look at these examples below.
$800,000 4-unit purchase (Longmont would be the most likely in Boulder County):
Down payment of $28,000 plus closing costs
Loan of $772,000 at 4%, 30-year amortization schedule
Live in one unit, rent the other three units at $1,200 per month or $3,600 a month coming in
Principal and interest monthly payment (3685)
Expense estimate (1440)
Expenses on a 4-unit might run about 30% of gross rent. In our example above, there is $3,600 coming in from three units. The owner-occupied unit value is assumed at $1,200 also. Therefore, a total rental value of $4,800 x.30 is $1,440. Actual expenses to review and total up should include a minimum of mortgage insurance, hazard insurance, taxes, utilities, property management. And maintenance.
If the numbers in this example proved to be accurate, the net outgo of buying a 4 unit, living in one, and renting the other three would be about $1,525.
Buying a single-family home or condo at $300,000:
Down payment of $10,500 plus closing costs
Loan amount of $289,500 at 4%, 30-year amortization schedule
Principal and interest monthly payment: $1,379
Taxes, mortgage insurance, hazard insurance, maintenance, and maybe HOA might total $450.
In this example, the total cash outgo could be estimated at $1,829 a month.
Tax Benefit Possibilities
When you invest in real estate, it is essential to review tax benefits with a tax professional who can not only show you the tax benefits of being a homeowner but also show you the possible tax benefits of being a rental property owner. One of the most important concepts to review is the concept of depreciation. It’s a tax deduction you get, but don’t have to spend money to get it. Depreciation can result in tax savings, which ultimately improves the cash flow of the investment. Again, your tax professional can run an analysis for you.
Steps to move forward with this idea:
- Visit with your licensed mortgage loan officer and see if you qualify
- Visit with your tax professional to review any tax benefits
- Meet with your REALTOR® to determine the most appropriate properties to view and make offers on
Real estate has proven to one of the best wealth building investment opportunities. Most people don’t make the first step to get started. With the right planning, buying a multi-unit, and living in one of the units could be a great way to create your real estate investment portfolio.
About Duane Duggan:
Duane Duggan has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: The Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life.
For questions, email Duane at DuaneDuggan@BoulderCo.com, call 303-441-5611, or visit boulderco.com.
Explore the allure of Boulder, Colorado, as a prime destination for real estate investment. Learn about the city's strong economic fundamentals, high demand for housing, and resilient market dynamics. Discover opportunities for capital appreciation, rental income, and strategic selling in this vibrant and competitive real estate market.
Explore the allure and trends of Boulder's luxury housing market, from stately mountain estates to sleek downtown condos. Discover key neighborhoods, recent trends, and opportunities in this vibrant city renowned for its natural beauty and progressive ethos.
Mortgage rates more than doubled in 2022, but good news appeared in November, a positive sign for those buying or refinancing a home.
Indeed, the 30-year fixed-rate mortgage fell for the second week in a row in November, hitting 6.67% — down almost half a percentage point from its recent high of 7.16%, the Mortgage Bankers Association’s (MBA) reported.
Despite the highest interest rates in decades causing downward pressure on purchasing power, annual statistics show that much of Boulder County still holds double-digit gains in single-family homes' median prices.
RE/MAX of Boulder & RE/MAX Elevate 
Click here to listen to Lynn Ryan on "Best Places to Live" podcast. RE/MAX of Boulders Top Producing Agent Lynn Ryan is featured on Danae Aballi’s podcast “Best Places To Live” to discuss the Boulder, CO, real estate market. Each episode host Danae Aballi interviews top real estate agents in highly ranked real estate markets to bring ideas and inspiration to real estate markets that should be on everyone’s radar. Listen to Lynn discuss Boulder, CO, from a real estate perspective and talk about the median home prices, property taxes, city growth, up-and-coming neighborhoods, and so much more.
Buying a home is a big decision. Before you dive in, it’s critical to think through the process of buying a house. If you follow a few simple guidelines, you can actually enjoy learning about your goals and financial outlook. The initial steps in how to buy a house are: Determine if you’re ready to buy a home Assess your financial situation Find the needed credit score to buy a house Discover what credit score is needed to buy a house Determine how much down payment you need Get a mortgage pre-approval Find the right real estate agent Let’s get your home-buying journey started with some questions to explore. Are you ready to buy a house? What kind of house best suits you? When you buy a home, the financial commitment is enormous. It is the biggest single purchase most people make in their lifetime. It comes with both risk and reward: the risk is that your investment doesn’t pan out as you had hoped. The reward is that you control your home, how it looks, the color it is painted, the finishes on the cabinets – and the equity you grow. One of the first steps to buying a house is to outline how homeownership fits into your long-term goals. Maybe you see homeownership as a path to wealth building: rather than paying rent to a landlord, you pay a mortgage and build home equity. Or you could be planning to start a family and want a home for the stability it brings. If you are buying a home with a partner, talk together about the qualities you each want in a home. Seeing what is available in the market also gives you a good idea of what you want out of a house. Looking at housing listings in different cities can narrow down your search. How stable is your financial and employment situation? Next, you will outline your financial status. Lenders say that to qualify for a mortgage, you need an adequate income and a stable work history of at least two years at one job. You also need to look at your debt-to-income (DTI) ratio. DTI is a simple calculation of monthly debt divided by monthly income. It plays an important role in determining if you have an adequate credit score to buy a house. To determine your DTI ratio, start a spreadsheet of all monthly payments like car payment, student loan and credit card payments. Divide the total by your monthly income. The result is your DTI ratio. Typically, it needs to be less than 50% to qualify for a mortgage. What credit score is needed to buy a house? The minimum credit score to buy a house is 620, according to Investopedia.com. The higher your credit score, the better your loan options and rate will be. A credit score above 720 typically gets the best loan. Your credit score is an assessment of how risky you are to lend money to. It’s based on: • Payment history • Amount of money owed • Length of your credit history • Types of credit used • Pursuit of new credit One of the most important steps in the process of buying a house is getting a periodic credit report to make sure it is at least the lowest credit score needed to buy a house – the magic 620. To keep your credit score high, you should pay your bills on time every month, pay off debt when you can and avoid opening new lines of credit. How much down payment do I need? In today’s market, many homebuyers do not put 20% down. First-time Colorado buyers who financed their home typically financed 95% of their home purchase compared to repeat buyers at 81%, according to the recent 2020 Profile of Home Buyers and Sellers released by the National Association of Realtors® (NAR) NAR. The report shows that Colorado home-buyers typically financed 86% of their home’s purchase price. That translates into down payments between 5 and 14%. First-time home buyers often rely on down payment gifts and loans from family. Among home buyers ages 28 and younger, 28% used a gift from a relative or friend to make a down payment, according to NAR. To better understand some of the top cities to live in check out Colorado's Top Cities to Live In. Get preapproved for a mortgage If your pre-home buying discovery process shows you are ready, the next among the first steps to buying a house is to apply for preapproval for a mortgage. You will answer questions about your income and assets and the amount you would like to borrow. Your lender will do a credit check. If you qualify for a mortgage, you will receive a preapproval letter that outlines the amount you can borrow. Find the right real estate agent The final step is to find the right real estate agent . An agent who is knowledgeable about the area guides you through the home buying process. They help you find homes that meet your desires, set up showings, and help you write offers and negotiate. As a buyer, you can usually work with a real estate agent for free. In most cases, the seller pays the buyer’s real estate agent’s commission. Tom Kalinski is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in commercial and residential real estate. For questions, e-mail Tom at tomkalinski33@gmail.com, call 303.441.5620, or visit boulderco.com.
If you’re a homebuyer in Boulder Valley, prepare yourself for a possible bidding war on that property you love. Sales price exceeded asking price by more than 50 percent in March in Colorado and a handful of other states, according to the Colorado Association of REALTORS®. It seems that asking price has become nothing more than the opening bid price. “Throughout the state, demand remains so strong that, despite a slight bump in new seasonal listings, buyers are simply viewing list price as the starting point for a bidding war that often includes waiving contingencies centered around appraisals and inspections and making sight unseen, cash offers well above the seller’s asking price,” CAR wrote in its report. Multiple offers on a house are great – if you are the seller. But for buyers, it’s tough. Especially when the statistics show that buyers are paying significantly more than asking prices. Boulder’s median price rose to $1.5 million in March, up almost 56% from the same period a year ago, reports Loveland-based Information and Real Estate Services, LLC (IRES). While Boulder’s median sale price tops the region, surrounding areas are also on the rise. Estes Park is the next most expensive in the area at $639,000, an increase of 11.1%. Fort Collins set a record of $495,000 for median price, up 16.5% Longmont and Loveland-Berthoud followed at $493,000 up 8.1%, and $430,000, up 7.5% respectively. Since a bidding war may be in your future, here are six tips to help you navigate and win from Bradley K. Tuttle’s Real Estate Update. Pre-Approval This will not come as surprise, but if you’re not pre-approved for your mortgage, you’re not ready to buy a house. A pre-approval letter shows that you are a serious buyer and can afford the house, and minimizes the risk of your financing falling through. Skip the Mortgage If you can make a cash offer, you’re likely to go to the top of the seller’s list. All-cash offers save on worry about financing problems and the time underwriting requires. Forego Contingencies Contingencies are conditions that have to be met before a sale can go through. You are stating that if something goes wrong with the appraisal or inspection, you will still buy the house at the price offered. Unfortunately this can tap into your down payment funds, and increase the amount you need to borrow. Offer a Big Deposit If you want to show a seller you’re serious, have a large deposit ready. A bigger deposit or down payment means you’ll need less money from the bank, which can make the difference if the bidding war put the home’s price above the appraised value. It’s important to realize that lenders will not loan you more than the home’s appraised value. Use an Escalation Clause If another offer or bid increase matches yours, an escalation clause details the amount your bid will increase. It benefits the seller and sets a limit so you don’t overspend. As in all financial matters, it’s important to establish pre-set limits and be prepared to walk away from a home. Tom Kalinski is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in residential and commercial real estate. For questions, e-mail Tom
Quality of life rankings and amenities are important factors in our housing market. As Realtors and residents, we enjoy seeing the top national rankings and accolades for our local cities. Quick quiz: which Colorado cities have a high percentage of residents that walk or bike to work or a low percentage of fast-food restaurants? If you guessed Boulder or Fort Collins, you're right on track. Fort Collins and Boulder are the Nos. 8 and 9 fitness-friendliest cities in the U.S., according to SmartAsset's seventh annual study. In fact, Western and Midwestern metro areas dominate the top ten for the second year running. To find the most fitness-friendly locales, SmartAsset compared 301 metro areas for key metrics: percentage of residents who walk or bike to work, fitness professionals per 10,000 workers, fitness establishments per 10,000 establishments, the percentage of restaurants that are fast-food establishments, and the average wage of personal trainers. If you guessed that fitness-friendly places are light on fast-food, you're right again. Across all metro areas studied, fast-food establishments represent 45% of all restaurants, compared with the top 10 fitness-friendly places where most have fewer than 40% of fast-food restaurants. In Wenatchee, Washington, which has the lowest percentage, your choice is limited to just over 27% of metro restaurants if you want a fast-food fix. Whether you know someone who is thinking about moving to Colorado or you are considering relocating to another city, these are the top 10 fitness-friendly cities where you can enjoy an active and healthy lifestyle: 1. Missoula, MT Missoula boasts 131 fitness establishments per 10,000 total establishments, the third-highest rate in the study, and 59 per 10,000 workers are fitness professionals. Adding to the fit profile, 7.1% of residents walk or bike to work, the 17th-highest rate across the metros studied. 2. La Crosse-Onalaska, WI-MN The La Crosse metro ranks as the fourth-highest for several fitness establishments and 5.2% of residents walk or bike to work. 3. Bend, OR The Bend metro area makes top 10 for two metrics: fourth for 61 fitness professionals per 10,000 workers and seventh for 116 fitness establishments per 10,0000. The average hourly wage of personal trainers is $18.72, placing Bend at 176th for this metric. 4. Ann Arbor, MI There are 67 fitness professionals per 10,000 workers in the Ann Arbor metro area, the second-highest rate for this metric. For their commutes, 7.4% of residents walk or bike to work, the 15th-highest percentage. 5. Bloomington, IN Eight percent of Bloomington residents walk or bike to work, the eighth-highest study-wide. 6. Santa Cruz-Watsonville, CA The Santa Cruz metro area ranks ninth overall for having only 33% of its restaurants specializing in fast food. Santa Cruz also comes in 12th for the percentage of residents who walk or bike to work, at 7.5%. 7. Flagstaff, AZ Flagstaff, Arizona, has the third-highest percentage of residents walking or biking to work at 11.5%. A personal trainer's average wage in this metro area is $22.27, which is higher than most other metros, placing it in the bottom sixth of the study for this metric. 8. Fort Collins, CO The first of two Colorado metro areas that rank in the top 10, Fort Collins offers 113 fitness establishments per 10,000 total establishments, ranking ninth of the metro areas studied for this metric. It also scores in the top 15% of the study for the percentage of residents who walk or bike to work with 5.2% and 46 fitness professionals per 10,000 workers. 9. Boulder, CO Boulder finishes in the top 15 in the study overall for two metrics coming in 11th for fitness professionals per 10,000 workers, at 53, and 12th for the percentage of residents who walk or bike to work, at 7.5%. Its final ranking is dragged down a bit due to its higher-than-other-metros average hourly wage for personal trainers, at $27.25. It ranks in the top 20 of the study for fitness establishments per 10,000 establishments, at 105. 10. Ithaca, NY A healthy 14.5% of Ithaca residents walk or bike to work, the second-highest percentage in this study for this metric. The average hourly wage for a personal trainer at $29.30, finishing third-worst out of 301 metro areas in this study for its high cost. Get the full results of the study at https://smartasset.com/checking-account/most-fitness-friendly-places-for-2021 Tom Kalinski is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in commercial and residential real estate.
Buyers who bought during the onset of COVID-19 were more likely to have higher household incomes, buy at higher price points, and buy a multi-generational home, according to the 2020 Profile of Home Buyers and Sellers recently released by the National Association of REALTORS® (NAR). NAR’s annual survey went to those who bought homes between July 2019 and June 2020, which encompasses several months impacted by COVID-19 prevalent since March 2020. The report delves into a lifestyle and other factors contributing to home buying and selling decisions, including the desire for homeownership and changes in jobs and family. Following are select highlights of the Colorado statistics gathered from the report. Home Buyer Characteristics Typical Colorado buyers are 47 years old with a median income of $108,800 which is 12% above the $96,500 median income of typical buyers nationwide. Twenty-five percent of all buyers are first-time buyers. Married couples make up 67% of recent buyers, 15% were single females, 9% single males, and 7% unmarried couples. Multi-generational homes were purchased by 11% of home buyers. The homes were selected to provide space to care for or spend more time with aging parents, make room for adult children moving home, or cost savings. For 25% of recent homebuyers, the primary reason for purchasing a home was the desire to own a home of their own. Homes Purchased 25% of homes purchased were new, and 75% were previously owned. Thirty-six percent of new home buyers wanted to avoid renovations and problems with plumbing or electricity, and 35% of previously owned home buyers were looking for better value. The most common home type purchased – 84% – was a detached single-family home, while 6% of recent home buyers purchased senior-related homes. A median of 15 miles lay between the home purchased and the home moved away from, and buyers expect to live in their home for a median of 15 years. Median home price in Colorado was $411,000, and buyers paid 100% of the asking price, compared to a nationwide median of $272,500. The typical home was 2,230 square feet and built-in 2005. Home Search Process 38% of recent buyers first looked online at homes for sale, while 24% contacted a real estate agent first. Most found Realtors and online search very useful in the home search process, with 83% noting real estate agents and 74% noting mobile and tablet search devices. Buyers searched for eight weeks and looked at 10 homes, three of which were solely online. Home Buying and Real Estate Professionals 86% of recent buyers purchased through a real estate agent, and 56% most wanted their agent to help them find the right home. 38% used an agent referred by a friend, neighbor, or relative, and 74% interviewed only one real estate agent during their home search. 92% of buyers would use their agent again or recommend their agent to others. Financing the Home Purchase 87% of recent buyers financed their home purchase and typically financed 86% of the purchase price. First-time buyers who financed their home typically financed 95% of their home purchase compared to repeat buyers at 81%. 53% used savings for the down payment, 48% used proceeds from a primary residence sale, and 13% found the most difficult step in the home buying process was saving for a down payment. 91% believe a home purchase is a good investment. Home Sellers and Their Selling Experience Home sellers most often cited their reason for selling as the desire to move closer to friends and family (16%), followed by a change in family situation (14%), and job relocation (13%). Sellers typically live in their home for 10 years before selling. 92% worked with a real estate agent to sell their home, and the sales price was 99% of the final listing price. Homes were on the market for a median of two weeks. Colorado home sellers said they sold their homes for a median of $48,500 more than the purchase price. Nationwide, sellers reported selling for $66,000 more. Data for the 2020 Profile of Home Buyers and Sellers was gathered from a 131-question survey using a random geographically weighted sample mailed by NAR to 132,550 recent home buyers. The statistics here are taken from the responses from Colorado residents. Information is characteristic of the 12-month period ending June 2020, with the exception of income data, which are reported for 2019. See the full report at https://www.coloradorealtors.com/wp-content/uploads/2021/02/Colorado-Profile-of-Home-Buyers-and-Sellers.pdf _________ Tom Kalinski is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in commercial and residential real estate.