House Hacking Expensive Markets

[Corey Lyons]

Hey guys!

Long time lurker, first time poster!

I live in Ventura, Ca and the market is through the roof like most other markets. The rent i currently pay is WAY more than id like to and i would like to get started on my real estate investment journey, perfect timing right!? 

Not too fast... When running the numbers on houses in the local area the numbers don't ever seem to line up for a sound rental/house hack investment. The 1% rule never seems to apply, i've found a few that cash flow but they are still way off the 1% rule. What do you recommend i do?

1. loosen up my parameters a bit when it comes to numbers.

2. Wait for the market to settle a bit.

3. completely switch up my strategy.

4. Something else.

PS: my main reasoning for wanting to house hack as my first strategy is im cash poor but i'm active duty so i have a VA loan in my resources. I have zero debt and great credit just not alot of reserves. So i'd prefer to property manage myself to reduce expenses and handle repairs at the lowest level because im extremely handy.

Any input is greatly appreciated.

-Corey

[Dan H.]

Thank you for your service. The VA Loan is a great benefit that you have earned. Your idea on house hacking leveraging the VA loan is a good idea. Here are some items to consider:

• Reality is with realistic expenses in your market virtually every property is initially cash flow negative. The thing is initial cash flow has little correlation with actual cash flow over the hold period. The rent increases in your market will result in the cash flow situation quickly improving. Every one of my purchases, in a market similar to yours, now meets the 1% rule and one LTR exceeds 2% ratio and one STR in 2019 exceeds a 4% ratio. It is math that a market with higher rate of rent increases will arrays eventually produce the higher cash flow (as long as expenses going up slower than rent and no equity extracted).
  
  Combine house Hacking with BRRRR to leverage you are bring handy and to creat sweat equity. This is an option that is not available OOS. This will provide some return even in the event that market flattens or declines slightly. Start by living in the most thrashed unit and rehab in place. Rent after rehab is complete at top of market rent and move to next most thrashed unit. The refinance R is difficult with a VA loan due to the extreme LTV, so do not rely on being able to extract that sweat equity but realize it is there regardless
  
  FHA loans have sustainability requirements for triplex and quads that prevents them from being purchased via FHA loan. Staying with triplex and quads eliminate FHA buyer competition. It will still be challenging to find a good investment property, but it cannot hurt to eliminate some of the competition.
  

Good luck