House hacking in Denver is a real estate investment strategy where you buy a property, live in part of it, and rent out the rest to cover your mortgage and expenses. It’s an excellent way to reduce housing costs and build wealth through real estate. By using rental income to offset expenses, house hacking allows individuals to enter the real estate market with lower financial risk while gaining hands-on experience as landlords.
This strategy is particularly effective in high-demand rental markets like Denver, where housing costs are rising. House hackers can leverage low down payment loan options, tax benefits, and rental income to maximize their investment while maintaining affordability.
House hacking in Denver isn’t new. For decades, homeowners have rented out spare rooms, basements, or accessory dwelling units (ADUs) to generate income. The concept dates back to early civilizations when multi-generational families lived together and shared housing costs.
In modern times, high housing costs and rising rent prices have made house hacking an increasingly popular strategy, especially among young professionals and first-time homebuyers. With the evolution of short-term rental platforms like Airbnb, house hacking has expanded beyond long-term leases, offering even greater income potential. At New Era Home Buyers, we’ve personally experienced the benefits and risks of house hacking. Keep reading to learn more.
Finding the right property is crucial to a successful house hack. Look for homes with multiple rental opportunities, such as duplexes, triplexes, or single-family homes with a basement apartment or ADU. Prioritize properties in high-demand rental areas with low vacancy rates, ensuring a steady stream of tenants.
Financing options for house hacking include FHA loans (3.5% down), VA loans (0% down for eligible buyers), and conventional loans (5-20% down). Some local programs offer assistance for first-time buyers. Owner-occupant financing typically provides better terms and lower down payments compared to traditional investment property loans.
Estimate your potential rental income and compare it to your mortgage, taxes, insurance, and maintenance costs. Be realistic with projections, factoring in possible vacancies, repairs, and property management fees if applicable. A solid financial plan ensures profitability and long-term success.
Once the property is secured, find reliable tenants through online rental platforms, local networking, or word of mouth. Proper tenant screening is essential to avoid late payments and property damage. Setting clear expectations and lease agreements will help maintain a positive landlord-tenant relationship.
Absolutely! Many house hackers live for free or even profit from their rental income. The key to success is choosing a property with strong rental demand, keeping expenses low, and effectively managing the property. Over time, appreciation and mortgage paydown further increase profitability.
Yes, if you:
If you’re considering house hacking in Colorado, you’re in luck! The state offers several great locations where you can maximize your investment. From high rental demand to strong property appreciation, these cities offer plenty of opportunities for house hackers. Whether you’re looking for affordable options or a place with a steady stream of tenants, Colorado has a spot that could be perfect for you. Here are the best locations to consider for your next house hack.
Legalities of House Hacking in DenverBefore you start house hacking, it’s important to understand the legal side of things. Make sure to check local zoning laws to confirm that multi-unit rentals are allowed in your area. If you’re buying in a community with an HOA, review their rules, as some may have restrictions on rentals. Additionally, if you’re thinking about using your property for short-term rentals like Airbnb, be sure to understand Denver’s specific regulations.
When house hacking, it’s important to consider the tax implications. Rental income is taxable, but you can deduct expenses like mortgage interest, property taxes, repairs, and depreciation. Depreciation can help lower your taxable income, reducing your overall tax burden. Keep in mind that if you sell the property, you might face capital gains tax unless you meet the two-year owner-occupancy requirement.
House hacking is a smart way to cut down on housing costs while building wealth in Colorado. There are several ways to do it, depending on your home and goals. You can rent out extra rooms in your house, lease a basement unit, or buy a small multi-family property and rent out the other units. Some people turn a guest house or garage into a rental space, while others list rooms on Airbnb for short-term stays. Each strategy has its own benefits, and the right one for you depends on your budget, lifestyle, and local rental rules.
When it comes to house hacking, the type of property you choose in Colorado makes a big difference. Single-family homes with extra rooms, basements, or guest houses can provide rental income. Duplexes, triplexes, and fourplexes offer built-in rental opportunities with separate units. Condos and townhomes can also work, but it’s important to check for HOA rules that may limit rentals. Finding the right property depends on your budget, long-term goals, and local regulations.
You don’t always need a property manager when house hacking, especially if you live in the home. Managing the rental yourself can save money since you won’t have to pay management fees. You’ll be responsible for finding tenants, handling repairs, and collecting rent, but living on-site makes this easier. However, if you have multiple units, a busy schedule, or don’t want to deal with tenant issues, hiring a property manager can be a smart choice. They take care of tenant screening, maintenance requests, and rent collection, giving you more freedom and peace of mind.
Whether you need a permit to house hack in Colorado depends on how you rent out your space. If you’re renting to long-term tenants (30 days or more), you usually don’t need a special permit. However, short-term rentals (less than 30 days), like those on Airbnb or VRBO, often have stricter rules. Some cities, like Denver, require a license for short-term rentals and may have additional regulations, such as occupancy limits or taxes. It’s always a good idea to check with your local government to make sure you’re following the rules.
House hacking in Denver is a great way to save money on housing, but you’ll still have monthly bills to cover. Knowing what to expect can help you plan your budget and keep your costs low.
If you financed your home, your biggest expense will be the mortgage. This includes the loan principal, interest, property taxes, and homeowner’s insurance. If you rent out part of your home, that income can help cover this cost.
Electricity, water, gas, and trash services are common bills. In Denver, heating costs can be high in the winter, so it’s good to plan ahead. If you rent out part of your home, you might split utilities with tenants.
Most renters expect Wi-Fi, so having a good internet plan is a must. You can include it in the rent or ask tenants to pay their share.
Owning a home means you’ll have to fix things when they break. Setting aside money each month for repairs will help you avoid surprises.
If your home is in a neighborhood with a homeowners association (HOA), you’ll have to pay monthly or annual fees. These cover things like landscaping, snow removal, and amenities.
Regular homeowners insurance may not cover rental activity. A landlord policy protects you in case of property damage or tenant-related issues.
If a tenant moves out and you can’t find a new one right away, you’ll need to cover the full mortgage yourself. Having savings set aside can help during these times.
House hacking in Denver can lower your living expenses, but understanding these costs will help you stay profitable. By managing your bills wisely, you can turn your home into a smart investment.
| Factor | House Hacking | Short-Term Rentals |
|---|---|---|
| Stability | More stable tenants | Higher turnover |
| Management | Less time-intensive | Requires frequent guest management |
| Revenue | Predictable monthly rent | Higher earning potential but seasonal |
| Regulations | Fewer restrictions | Often heavily regulated |
House hacking can be more than just a short-term solution—it’s a powerful stepping stone toward building a long-term rental portfolio. The key is to reinvest the profits from your house hack into acquiring more properties. As your equity grows, you can either refinance to pull out cash or sell to fund additional investments. Over time, these properties will generate passive income, and the appreciation in value will help build substantial wealth.
By strategically expanding your portfolio, you can eventually transition from house hacking to owning multiple rental properties, creating a steady income stream for the future.
What happens when house hacking no longer suits your lifestyle or financial goals? There are several exit strategies you can pursue. One option is to convert your property into a full rental. If the property’s location and condition are right, you may be able to transition into a landlord role, generating consistent rental income from multiple tenants.
Alternatively, you may decide to sell the property if its value has appreciated significantly. This allows you to cash out on your investment, potentially with a nice profit to reinvest in other ventures. Finally, if you’ve built significant equity, you could refinance to access cash for your next investment, whether it’s a fix-and-flip or another rental property.
House hacking isn’t the only real estate investment strategy out there, but it does offer several advantages over traditional rentals or flipping. When compared to traditional rentals, house hacking offers the advantage of offsetting your own living costs, potentially allowing you to live for free or even profit from your property.
On the other hand, flipping houses requires more capital and carries more risk due to market fluctuations. While flipping can be lucrative, it demands more upfront investment and involves a greater degree of uncertainty. House hacking, in contrast, provides a relatively low-risk entry point into the Denver real estate market, with the potential for long-term gains.
In conclusion, house hacking is an effective, flexible real estate strategy that can generate income, reduce living expenses, and create opportunities for long-term wealth building. By understanding the unique strategies, challenges, and financing options available, you can make the most of house hacking in Denver.
House hacking in Denver is an excellent way to build wealth, lower living costs, and gain valuable real estate experience. By choosing the right property, managing expenses wisely, and staying informed about local regulations, you can successfully house hack and set yourself up for long-term financial success.
Brett is a real estate investor in Denver, Colorado and has been working in real estate for over 20 years. He grew up in Aurora, Colorado and earned his MBA from the University of Denver. Besides flipping houses, Brett loves spending time with his wife and two daughters. In his free time he loves playing golf, skiing and giving back to his community. He owns New Era Home Buyers in Denver, CO.
