House Hacking Question: How much should I put away ?

Question

Hey Everyone!

I'm getting excited about 2018 and planning my goals for the year to come. I'm looking to move out of Jersey City and purchase a Duplex in Westchester, NY. I'm shooting to qualify for an FHA 203K loan depending on what I can find. I understand how much I need to save for the down payment, closing costs and such. My question is how much should I save for the unexpected issues with buying my first property?

Any experienced House Hackers would love to hear your experience!

Thanks!

Matthew Porcaro · Answer

Honestly, I have an account dedicated to taking in only rent each month. I don't touch that money. Any "profit" I make on my property is basically held there as a rainy day fun, until it grows large enough to be parlayed into another deal.

Brent Coombs · Answer

Account Closed, if you feel the need to ask, then you're not saving enough!

(Hint: The correct answer is: every spare dollar that's not needed for necessities!)

Omar Khan · Answer

Account Closed that, ideally, you should save every spare dollar. But you can get better perspective if you know your goals and understand the cost-benefit analysis associated with those goals.

Michael Ehmann · Answer

Oh also, one other thing I forgot to mention. I'm all for systematizing things and outsourcing a lot of rehab/repair tasks. However, I personally have found it valuable to try and do some of the things myself, at least on my house hack.

For example, before this property, I didn't know how to replace a toilet, how a washing machine works and how to diagnose problems associated with it, how to hang a ceiling fan, etc. While I do not want to be doing these things for every one of my future properties, I think it's valuable to at least have some fundamental home maintenance skills, and  experience can often be the best teacher.

So for you, I would still plan for the inevitable things that will go wrong and plan them such that you can outsource the work if you need to. But when something does go wrong, I would at least consider whether you can try to do it yourself if you have time or if you can observe the outsourced work, just so you have a better understanding of home maintenance. That's my 2 cents anyway.

Matt B. · Answer

Account Closed My rental isn't owner occupied so I cant really help you there but one piece if advice I see going around a lot was 1) wish they started sooner and 2) made sure they had large cash reserves for the unexpected and/or economic downturns.

Account Closed · Answer

@Anna M. Thank you for the advice! Yea I definitely look forward to my first house hack!  @Matthew Porcaro That is a great way to handle the "profits". Thank you!!

Anna M. · Answer

Save as you would for anything and factor in buffers.I house hack and that is my determined style to achieving financial freedom among other frugal practices.I have house hacked on all my past purchases and closing next week on my latest purchase with the intent of continuing to house hack.Moving out of current property to my new property, a duplex in Denver, CO.I love house hacking and would highly recommend it.Cheers!

Ceasar Rosas · Answer

Account Closed

I will touch on one thing. Besides vacancy, etc... It will truly depend on your skill set, especially in the construction area. When I bought my 2 family which I still house hack, I did  most of the reno until now actually. I spent about 7k to get the tenant unit rent ready and about 3k to get my unit ready. Over time I've spent about an additional 15k in updates. These were planned from the beginning. I do plan to put about another 60-80k for a basement renovation and exterior concrete job I want to do. Now if I would've paid out a GC I probably would have paid at least 3 times that. Assuming you don't have to renovate, then what happens if a pipe breaks. Do you need to call a plumber everytime? I had a hot water line corroded at a T fitting, and had to replace the fitting which was behind a wall and about 15 feet of copper piping. Did it myself and maybe paid about 200 to do it. A licensed plumber would've been about 2k in NYC. I've replaced gas valves, boiler and radiator valves at material cost and a few hours of my time. I would say you should want at least 5k per unit in reserves. If you only have 5k then make sure you save, save, save until you get to what you need.

Michael Ehmann · Answer

Account Closed, I recently house-hacked my first investment (condo) by adding an extra bedroom, effectively turning it into a 3/2. Everyone else has covered anything I'd say about how much to save for extra costs, so I'll just throw in my 2 cents and talk about the different things I've had to deal with.

In the past few months I've replaced one toilet, the washing machine, and the oven (which is like half of the appliance stuff that could go wrong). One of the biggest lessons for me: have a plan BEFORE things go wrong. When my washing machine broke, I was out of town answer got a call from one of my roommates saying that the machine was full of water but wouldn't drain. I hadn't thought through all of the "what if" scenarios to know what to do in this situation. You'll never be able to plan for everything that will will wrong, but at least think through the most likely ones (like your appliances breaking).

The other key, as mentioned in many of the podcast episodes, is to effectively train your tenants. I have some new guys moving in next week, and we will be sitting down to review the lease together in detail so that we can set proper expectations about our tenant/owner relationship.

Michael Ehmann · Answer

Account Closed, will this be your first investment purchase?

House Hacking Question: How much should I put away ?

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