Stumbled upon Possible RE Investment - Advice Appreciated


Hi all,

I came across this forum researching a particular real estate investment opportunity that I’ve been debating, and figured I should try to solicit some input from the Pros, especially since my background is void of any real estate investment knowledge.

I bought a 3,200 SQFT house in April of 2014 for $305K in Arvada, CO. The house was completely re-modeled upon purchase and in a way that made renting out the bottom seamless: 1,600 SQFT up and 1,600 SQFT bottom, BOTH having 3bd/2ba, each having FULL range kitchens, laundry rooms, living/family rooms, dining rooms, completely separate entrances (walk-out basement accessed around side yard), and bifurcated parking spots. Financing was a little tricky since I had to convince the bank that a single-family was going to occupy the house (not zoned or legally grandfathered in for multi), but it all worked out at the end. It was perfect to lease out the bottom our first year, which covered a substantial portion of our $1,800/month mortgage, but we recently had to ‘boot’ the tenants downstairs so that we could take over a couple of the rooms (baby number 1 on the way and I needed to move my office to make room for our little guy - crazy how time flies and space requirements double :wink: ).

The hot Colorado rental market got me thinking. Is it time to buy another house and rent out our existing one in a duplex style manner. The property management company that I met up with the other day is convinced that I could squeeze AT LEAST $3K/month from renting ($1,700/month top and $1,300/month bottom). Our current principal balance on our existing mortgage is $284K on a 30-year, 4.49% fixed-rate and my lender is confident that the house would reappraise (if needed) for at LEAST $410K.
The positive cash flow from renting is apparent, but I am not sure if buying another house is the ‘right move’ , especially since I am boggled by the extremely overpriced homes on the market due to low inventory and high demand. I don’t want to overpay for a new house to raise a family in, especially if we’re experiencing a bubble. We did just prequal with our lender the other day without a problem (NO HELOC or no proof of renters needed) and are looking to spend sub $450K on the new house.

Is this a ‘smart’ real estate investment decision to buy another and rent our current house, or should I wait? The other option would be to sell and rebuy, but I would probably have to remodel the basement to make the layout make sense for a single family in order to get the most out of the market…and for it to appraise. Another option would be to rent for another year and then use the cash to re-model to a single-family and just live in it while our family grows. Love the area, as we have awesome neighbors, and the demographics are only continuing to shift favorably, but we are definitely not emotionally attached to the unit.

Wish I had the real estate background to make this easier, but that’s why I am here now - to learn as much as I can from others in order to make a wise decision down the right direction. I truly appreciate any and all advice!


You have to check with local zoning regs to see whether you can do this. It may not be zoned for 2 family.

Also, insurance may exclude coverage for non-conforming use.


@William_Bronchick. Thanks so much for the advice!

I called my insurance company. They said that insuring the unit, even though it’s non-conforming, will not be a problem. They even double-checked with my current carrier just to make sure. I’ll also require my renters to have renter’s insurance. It is NOT zoned for multi-family, only single family. The only hurdle was securing the financing since the bank said it looked like a multi-family, but was zoned as a single. So the seller and I had to do some things to make sure it would appraise as a single family (i.e. rip out the oven range and fridge downstairs), but we got through it. I may have a little bit of trouble getting the house reappraised in the condition it’s in now (if i wanted to), but I don’t need to for now.

Any thoughts on if renting makes sense, considering the hot market? Is my downside protected if prices (rental) were to drop back down to reasonable levels? What’s the magic rental number (combined for both units) that you’d like to see before moving forward in renting the property?

Also, in buying a new house, any advice on how to find a good deal on a home that has a floorplan/layout that makes sense (with a good skeleton) where I could put the time and money into the repairs myself? I have as much time as I need to do the work before I have to move since we currently have a house.

I do not have ‘cash’ on-hand to buy a house for my family’s needs, so investors may beat me with their cash offers there. I do have enough to put 10-30% down and do conventional financing, though. Further thoughts appreciated.

Thanks, again, for the advice!


I don’t see rents dropping until lenders soften up and give out free money. In other words, not soon.