House Hacking Vs. Live-n-Flip

[Michael Storch]

Hello All,

This is my first post on BP and it comes after I just finished  reading  "How to Invest in Real Estate" by Josh and Brandon. I have narrowed down my potential real estate interests to either house hacking or live-n-flips in the Raleigh-Durham area in North Carolina. This will be my first go around in real estate and I am very much in the learning phase of the journey right now. 

I am 23, and I am going to be moving to the area in early 2023 after I finish my graduate education at UMich to be closer to my partner that is starting at UNC. I have been doing a decent amount of research about both strategies but my partner is concerned that I will end up spending all of my time outside of my W-2 fixing the house for the live-n-flip strategy. For the house hacking I am just having a hard time finding deals in the area due to a seemingly limited supply which is why I am leaning towards live-n-flips. I wanted to know if people have stories or advice or knowledge about doing successful Live-n-Flips without it consuming your life?

More specific questions like how long does it take to rehab certain parts of a home? How much work should I do myself versus hiring someone else? How should I find deals for live-n-flips? Etc. 

I really appreciate the help in advance! 

[Jeff Schemmel]

@Michael Storch why not do both?

aside from that, estimating rehab costs and timelines is one of the hardest things in the business and it's not a question that should be asked with a general scope.  There are a few ways to go about tackling this situation, and I'll do my best to guide you as I would if we were sitting and having coffee and discussing this.  Feel free to reach out and chat...

First, if it's your first time, I recommend asking yourself AND your partner a couple of key questions:
1.) do I want to be a landlord?
2.) do I want to share a living space with other people outside of myself and my partner?

If you answered a hard "NO" to #1, buy the most cosmetic entry-level flip you can get your hands on.  something out of the 80s that's got good bones with more modern construction materials that you can replace flooring, paint, trim, windows, etc and do it as you have time for.

If you answered "yes" or "potentially, yes" to #1, I suggest networking with other investors and learning what landlord life is like and if it makes sense for you in the short-term with the eventual goal of hiring property management later on.  This is pretty important, especially if your partner is already concerned about how much time is involved in this.

If you answered "NO" to #2, then a duplex is a good fit.  Keep separate units in order to gain income via house hacking.

If you answered "YES" to #2, then consider buying a single-family or duplex that is more "turn-key" and renting rooms in your half of the duplex, or in a single-family with more rooms to gain a higher return in a more aggressive house hack.  You may only need to do this once to get closer to the comfort side of the house hacking spectrum (as Craig Curelop describes in his book The Househacking Strategy).

Regarding what rehabs are less urgent and time-consuming, here are some questions you could ask yourself about a given property:
1.) what large capex items are outstanding?  (think roof, foundation, siding, HVAC, windows, etc) these are usually permit-requiring items that are intensive and require more time/investment.
2.) what interior/cosmetic things could be done? (paint, trim, flooring, appliances, countertops, cabinets, closet spaces, shelving)  all these things are non-urgent that you can do at your own pace and can even make excellent projects to do with your partner and get creative.
3.) Things like taking out walls and changing floor plan are the kind of projects that will get you in over your head as a beginner and/or someone with a hesitant partner.

all that aside, there's another important element to what you said that I want to call out... It's obvious that your partner has some hesitations and I can't stress enough how important it is to be on the same page with what they want.  It's more important than you getting a higher return by forcing equity.

You briefly mentioned not finding deals. Are working with a realtor? IF so, is that person an investor? If you are, try to work with someone who's got a track record working with investors in small-multi-family or one who is doing these deals for themselves (preferably the latter). They can provide so much guidance, connections, and deals you may not normally have access to. That's not always the case, but do enough interviewing and you'll find these people. Otherwise, there are always deals on the MLS, just keep looking and letting everyone know what you would like to do.