The Full Circle House

It was 2007, I married my favorite person in April and by July we were packing up our rental house in Hamilton, Ohio to move to Denver, Colorado to be the next HGTV house flippers! 

Haha…hardly.

On September 11th, 2007 we bought our first home, the definition of a fixer-upper. I was still wrapping up my day job back in Ohio and hadn’t even seen the house yet when we went under contract. We bought the house for $200,000, a whole 30k more than the sellers bought it for only one month prior.The pains of picking a hot market.

The house on Trenton Street was a bungalow, no more than 900 square feet with two bedrooms and one bathroom on the main level and a full basement with an “illegal” bedroom and bathroom. Having been built in 1947 every room was compartmentalized with arched doorways between. The house screamed 1960s makeover with wood paneling and blue carpet, can you dig it? The kitchen had dark wood cabinets and tiny black and blue speckled tiles as the countertop and backsplash. The only appliance the kitchen had left was the surprisingly handy trash compactor, a luxury that went out of style for reasons unknown. The best part however, was the basement. Partially finished as a man cave complete with groovy bar, faux leather and chrome bar stools cemented into the foundation. Integral to the home’s structure, clearly.

As I crossed the threshold of this gem of a house for the first time I was both exuberant and terrified. It was not exactly…stylish… but it was ours. I could see all of the opportunities for bringing new life to this urban bungalow but was overwhelmed by the task we had set for ourselves. This was going to be our home for the next year. Yes, that’s right, we were going to live in this fantastic dump while we fixed it up.

Since the plan was to gut the entire main floor, we planned to live in the bachelor pad basement. The only upgrade we made before moving in was replacing the raunchy red and black striped carpet in the basement. The, no exaggeration, 8 sq ft bathroom in the basement would be both our bathroom and kitchen. You might call us insane to decide to do a live-in flip when A) we never flipped a house before and B) we were planning to do as much work ourselves as we could. Regardless, we were stubborn and too young and dumb to care what we were getting ourselves into.

Within a few days of moving in we met our new neighbors. They were a more mature couple, shall we say, that were nearly finished with their house that they “popped the top” on (meaning they added a second floor). The moon and stars must have been aligned because we learned that our new neighbor was a retired… *drumroll please* general contractor! Suddenly I felt more at ease taking on this massive project knowing that only a few steps away was my very patient neighbor with answers to the million and one questions that would inevitably pop up.

Now it was time, the first day of my house flipping career. Goggles, masks and gloves in place, sledgehammers in hand – it was demo day. We planned to bang out demo in one day. You could say this was our first lesson when it comes to making such plans in a renovation. I raised my sledgehammer, took a swing, and… barely put a dent in the wall. What the bleep…I don’t understand…on TV they can kick through the walls, what was happening here? Well, what they don’t tell you is back in the day they built houses to stay and they used this wire net called lath and filled it with plaster to build the walls. No crumbly drywall here.

Needless to say the demo phase took much longer than we expected. Once we got the main living area and the kitchen to the studs we brought in two or three different subcontractors for each trade to get their estimates. We were able to hire our neighbor, the general contractor, by the hour to help with certain projects, to oversee other contractors, and to give us guidance on how to do things properly.

After a long six long months we finished the rehab of our main living areas and bedrooms and finally got to move upstairs. That’s right – no more bathroom/kitchen combo. By this time it was spring which is when the market starts to pick up again for both selling and renting. Just as we were thinking about putting our first flip up for sale, we heard that Denver’s rental market was picking up some serious steam.

So instead of listing it for sale we reached out to a property manager to find out what we could get for our property if we rented it out. We were pleasantly surprised that even with our property being under 1,000 sq ft and only 2br 1br, it would rent for over $2,000! With this new information in mind we decided to give it a try as a rental. It would be a great way to increase our cash flow. The math worked for making it a rental since our mortgage was so low compared to the rent it would bring in.

We decided to list the house with a property manager on an a la carte basis meaning they would place the tenant but we would manage the property and communicate with the tenant. Fortunately one of the first applicants was a single guy whose father, a cancer surgeon, was co-signing. We had found the unicorn of tenants. Hoping it wasn’t too good to be true we offered him the rental and sure enough, his father sent us a check. The check arrived about two weeks early every month so it was a reliable income stream and the simplest landlord experience one could hope for. The tenant rarely needed anything from us and the house, being recently rehabbed, required little maintenance.

Once the property was rented we did a cash-out refinance to fund the downpayment on our next house. The refi allowed us to take out a new mortgage based on the value of the home now that it was updated. The original purchase price was $200,000 and after $30,000 of updates it was valued in the low $300,000’s. Our new mortgage allowed us to take out up to 75% of the total equity in the home. After deducting the $180,000 we owed on the house originally we walked away with $90,000 for our next house.

The increasingly competitive Denver market had been perfect for renting our flip but not so great when it came to the prospect of securing the next investment property. Every listing it seemed had multiple offers within days coming in tens of thousands of dollars over asking price. Feeling unprepared to compete in such a market, we started looking further outside of the city. When my husband moved to Denver a few months before me, he stayed with a wonderful couple through Airbnb. This great experience made us consider renting a room out on Airbnb too. We ended up finding a bilevel house in Arvada, a suburb of Denver, with a garage door that could be easily converted to a separate entrance for guests. They would have a bedroom, bathroom, and living area. Soon after moving in we posted our guest space on Airbnb and quickly started booking reservations.I decided to return to my former career and take a job at The University of Colorado, Denver. However, I did so reluctantly and only to bring in a reliable  income. It didn’t look like we would be able to buy another income property anytime soon.

After a couple of years my discontentment finally bubbled back up to the surface and I found myself looking for connection. I knew there must be many others who were feeling the same way. Little did I know that over the next four months I would learn more about real estate investment than I had in the last four years and discover a community of like minded people who were tired of working to achieve someone else’s vision. 

Bigger Pockets (www.biggerpockets.com) was one of the key resources that I used to dive deeper into the world of real estate investment. It was different from the many blogs and websites out there because it allowed real estate investors at all levels to connect and ask questions. This led me to other forums and resources related to real estate where I learned and networked.

Along with all of my new resources on real estate I came across this concept called Financial Independence (FI). Something in my head clicked. This idea of retiring early with passive income through real estate had been in the back of my mind for years but I hadn’t been able to turn it into an effective plan of action. A life with more time, more enjoyment, not more stuff – that was what I wanted, and it’s what the FIRE (Financial Independence Retire Early) community is all about. The FIRE community spoke to me – and I listened – absorbing hungrily this new approach that would release me from my 9-5. Finally I found the instruction book to help me build the life I wanted to live! The Choose FI podcast opened up another world to me. As I listened to them describe to their listeners how they enjoy fulfilling lives without spending much money and retire early with what they save I could envision myself doing the same.

Now it was time for action. But where to start when there was such a mountain ahead of me on the way to financial independence? First I started by analyzing our cost of living. Our house in Arvada was only about 500 square feet larger than the house on Trenton but it had a large (by Denver area standards) ⅓ acre lot. I realized that in the summer months our water bill was close to $300 a month because of all the water it took to keep the lawn alive! As I continued to compare expenses between the two houses it struck me how much lower they were at the Trenton house. If we wanted to expand our real estate portfolio, we needed to save some money. While some people get into real estate without using their own money, I wanted to make sure we had a good nest egg of our own to use.

Despite us “house hacking” or renting out space in our Arvada home, the money we made mostly went to paying for the large house instead of amounting to real profit. I decided it was best if we moved back into our flip and sell the Arvada house. The Trenton house was cheaper to live in, and since the Arvada house was our primary residence we wouldn’t have to pay capital gains taxes on the profit from the sale. We wanted to continue to rent through Airbnb but in a way that we would make a profit.

With the Denver market being as competitive as ever we sold our Arvada house within a week and were back where we started in our house on Trenton. With the profit from the sale of the Arvada house we finished the basement to use as our new Airbnb rental. Luckily the house was laid out well for this purpose. You didn’t have to walk through much of the house to get to the basement. In the full basement we put in an open living room and simple kitchenette as well as a bedroom and ensuite bathroom.

Within days of listing we had our first reservations. The Trenton house, being in a more urban location than our house in Arvada, drew guests for shorter stays. This meant more turnover and a lot more work. I did some research and found that renting to travel nurses can be a good way of finding renters that would be there for a few months at a time. I found that there are sites that are like Airbnb but specifically for travel nurses, and facebook groups that connect nurses with property owners like ourselves. Not long after posting on a facebook group specifically for nurses traveling to Denver, we got our first tenant.

March 2020 came along, bringing with it a tidal wave of uncertainty because of the pandemic. A nurse canceled with us because their assignment was canceled so with trepidation I went ahead and opened up the space to a new renter. There was a lot of interest and we found someone who wanted to stay for a full year. We were hesitant, not knowing what difficulties the pandemic would bring, but thought it would be a good idea to get a long term tenant in place.

Now in April of 2021 we still have the same tenant and are hoping she will decide to renew her lease for another year. It’s quite a simple method of house hacking not having to worry about turnover and vacancy.

So that is the story about the full circle house – the house we bought as a live-in flip,  which instead of selling we rented out to a long term tenant. Then after learning about FI, we moved back into, and it is where we still live today and will continue to rent out our basement. Oh and should I mention, this house is now valued for 120% more than what we bought it for!  Hard to say what will happen next, I have loved this journey we are on and am not sure if we could ever say goodbye to our cozy little house. But, as they say…Never Say Never!

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