St Pete house hackers

[Andrea D.]

Hi there fabulous house hackers and others who considered it, but went a different way,

I am trying to decide if I should wait it out in the St Pete area for a duplex /triplex to house hack, however I’m finding it to be incredibly difficult in this market. I have been putting in offers as each comes on the market within a day in areas that aren’t in the slums, and within my budget (needing to stay under $400k).

In the market here, it may not be a realistic goal, as I am having a difficult time securing anything since properties have been scooped up in cash... after 4 months and nothing, my original primary residence has sold, month to month rent in furnished Airbnb’s is adding up as well as the storage unit holding my stuff, and I continue to watch interest rates rise.

To people who have househacked, was it truly worth it that you would wait it out if you were in my shoes? During this time, since many people are moving to Tampa each day, the amount of house you can get even compared to 4 months ago is becoming less and less. To me it doesn’t seem to make sense to wait, but maybe it does and I just haven’t experienced the power of a househack.

What would you do??? Thanks in advance!

[Dan Maciejewski]

Money is as cheap as it's ever going to be, so that is one factor you should consider.

Prices do not look like they are going to go backwards, and even if appreciation slows, there will still be appreciation. That means that you're likely looking at the lowest prices you'll see going forward. Unfortunately, 4 units and under are valued on comps, not NOI or other commercial metrics, so they can sell down to 4% cap rates and below.

Rents are stable and only going up in our county.  The demand for rentals -- especially in the rent ranges you'll be looking at, isn't going down.  We are bringing in a lot of high earners and the luxury apartments are being built for them but nobody is building new affordable housing -- by affordable, I mean rents under $2,000/month.

Right now, in our county, you can't expect to cash flow in a 2-unit house hack.  Maybe in a 3, most likely in a 4.  BUT. in any of those cases, you will drop your housing expense while building equity and learning.  It depends on your goals and your outlook for the next 2-5 years to determine what makes sense to you.

Your best bet in the current market is to find a value-add that is under-rented for the ARV. Then put some money and sweat equity into it and put great, market rent tenants in. Anything close to turnkey is looking like a 6 cap at best, and not usually even that. I looked at a small multifamily last week that was offered at a 3 cap and would go up to a 6 after some equity and maintenance -- not a good deal!

Right now there are 17 small multifamily properties under 400k in Pinellas county.  They are at an inventory point where you look at each individually and run numbers as they come up.   

My advice is don't rush into anything just to buy it -=- that can be a very expensive lesson.  But, keep looking and as you keep running numbers, estimating rents, learning neighborhoods and what market rents could be, you'll see something that looks promising.  

We have been around a 4-6% appreciation month over month for the past few months, so you are correct.  The longer you wait, the less is out there.  The good news is that interest rates just dropped a bit, so money is still cheap!