You can buy a duplex or fourplex anywhere in Denver, but Baker offers a rare blend of character, location, and steady renter demand. If you are eyeing a house hack or an income play here, you also need to plan for city licensing, potential historic rules, and a softer rental market than a few years ago. In this guide, you will learn how to underwrite a Baker small multifamily the right way, what permits and inspections to expect, and which financing paths fit 2–4 unit properties. Let’s dive in.
Why Baker appeals to investors
Baker sits just south of downtown with late‑19th and early‑20th century homes, plus a local historic district in the northeast section. Its boundaries run roughly from West 6th Avenue to West Mississippi Avenue and Broadway to the South Platte River, with walkable South Broadway nearby. This mix supports rental demand for both long‑term residents and newcomers. Review neighborhood context and historic notes in the Baker neighborhood overview.
Market snapshot to watch
Denver delivered a large wave of new apartments recently, which pushed vacancy higher and eased rent growth across the metro. By early 2025, vacancy hovered around 7 percent with softer rent pressure, which affects lease‑up time and concessions for value‑add plans. See local coverage on vacancy trends in Axios Denver’s report. The takeaway for Baker: underwrite conservatively, stress test higher vacancy, and avoid aggressive rent lift assumptions.
Rules you must follow in Denver
Rental license and inspections
Denver requires a residential rental property license for rentals offered 30 days or longer. The license runs on a four‑year cycle and needs a passing third‑party inspection. For multiunit buildings, expect inspection of a sample of units plus shared systems. Confirm the property’s license status and request the latest inspection checklist before closing. Start with the city’s Residential Rental Property license guidance.
Zoning, permits, and historic review
If you plan to add units or change how spaces are used, you will likely need zoning and building permits, and code upgrades may be required before a new Certificate of Occupancy. Parts of Baker fall within a local historic district, so exterior work can require Landmark review. Learn more about permitting and potential use changes via Denver’s live/work and permitting overview and confirm parcel details on the city’s zoning map.
Colorado landlord‑tenant basics
Colorado sets rules on deposits and timelines. The security deposit cap is two months’ rent for residential leases, and return deadlines apply. If you ever need to proceed with an eviction, you must follow statutory notice and court steps precisely. Review statutes in the Colorado Revised Statutes Title 38 and process summaries from the Colorado Judicial Branch.
Financing options for 2–4 units
- Owner‑occupant paths. FHA and VA allow you to buy 2–4 unit properties with low down payments if you will live in one unit. FHA appraisals require minimum property standards, and 203(k) can finance rehab on eligible properties.
- Conventional loans. Fannie Mae and Freddie Mac treat 1–4 units as residential. If you occupy a unit, lenders may count rental income from the property to qualify, subject to program rules and reserves. See rental income treatment in Fannie’s Selling Guide.
- Investor loans. If you will not occupy a unit, portfolio and DSCR lenders underwrite primarily to the property’s income. Expect different down payments and rates than conventional owner‑occupied loans.
Underwriting that fits Baker
- Income and vacancy. Use current rent comps and model conservative rent growth. Given metro vacancy near 7 percent, run scenarios with higher vacancy and longer lease‑up. Reference recent trends from Axios Denver.
- Operating costs. Budget property management at roughly 6–10 percent of collected rents if using a third‑party manager. For older Baker buildings, set aside meaningful reserves and a capital plan. Many investors use a baseline per‑unit monthly reserve and adjust higher for older systems, roofs, and mechanicals.
- Taxes and assessment. Property taxes can materially change your net operating income. Colorado’s assessment framework updates periodically, and Denver’s assessed values and mill levies determine your bill. Estimate scenarios and review the city’s Assessor FAQ.
- Insurance. Get quotes early. Ask about coverage for sewer backup, liability limits, and any lender requirements.
Due‑diligence checklist
- Title and legal. Order a full title report and check for easements, recorded leases, municipal liens, and open permits.
- Licensing. Verify the Denver rental license and request the most recent inspection checklist and any remediation items. Use the city’s rental licensing page.
- Zoning and historic status. Confirm the number of legal units, parking requirements, and whether the parcel sits in a historic district. Use the zoning map and plan for Landmark review if needed.
- Physical condition. Hire a third‑party inspector for structure, roof, foundation, HVAC, electrical, plumbing, and sewer. For pre‑1978 properties, be mindful of potential lead‑based paint.
- Financials. Collect the rent roll, leases, deposit ledger, utility history, and a recent P&L. Reconcile actuals to market comps.
- Permits and past work. Confirm prior conversions or improvements were permitted. Unpermitted work can delay licensing or trigger costly fixes.
Timeline and negotiation tips
- During the inspection window. Order building inspections, pull the rent roll and leases, verify license status, open title, and confirm appraisal requirements with your lender. Appraisals for 2–4 units have specific forms; see Fannie’s appraisal report exhibits and forms.
- Before closing. Make sure any life‑safety items that would block licensing are addressed or escrowed. Bind insurance and finalize loan underwriting with acceptable rental income documentation.
- Negotiation points. Clarify rent and deposit prorations, which utilities are tenant‑paid, and remedies if code or licensing issues surface.
Common pitfalls to avoid
- Assuming a unit is legal without verifying zoning and permits. Always confirm the legal unit count and prior approvals.
- Underwriting to best‑case rent lifts in a softening market. Model base cases with more vacancy and modest rent growth.
- Skipping the city inspection records. Denver’s licensing checklist can reveal issues that a general inspection might not catch.
- Forgetting reserves. Older buildings often need near‑term work on roofs, mechanicals, or sewer laterals.
Get local help
A smart Baker small‑plex buy balances neighborhood appeal with disciplined underwriting and strict compliance. If you want help sourcing on and off‑market options, modeling returns, or navigating permits and licensing, our investor‑focused team can guide you from search to close. Reach out to schedule a strategy call through Luxury Presence.
FAQs
What makes Baker different for small multifamily?
- Baker’s central Denver location, historic housing stock, and proximity to South Broadway support steady rental interest, but parts of the area are within a local historic district that can affect exterior changes. See the Baker neighborhood overview for context.
How does Denver’s rental license affect my purchase?
- Denver requires a rental license with a third‑party inspection on a four‑year cycle, and multiunit properties have sample‑based inspections of units and shared systems. Verify license status and review the latest city checklist before closing using the rental licensing FAQ.
What vacancy and rent assumptions should I use in 2025?
- With metro vacancy near 7 percent and rent pressure easing, model conservative rent growth, add cushion for concessions, and stress test higher vacancy. See trends in Axios Denver’s coverage.
Can I use rental income to qualify for a mortgage?
- For owner‑occupied 2–4 units, many lenders can count a portion of subject property rental income, subject to guidelines and reserves. Review details in Fannie Mae’s Selling Guide on rental income.
What Colorado landlord‑tenant rules should I know?
- Security deposits are capped at two months’ rent and must be returned within statutory timelines, and eviction procedures require proper notice and filings. Read the Colorado Revised Statutes Title 38 and the Colorado Judicial Branch eviction page.
