Nervous about moving forward, but evaluating a couple 4plexes for house hacking

Anchorage, Alaska
Real Estate Deal Analysis & Advice
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Nervous about moving forward, but evaluating a couple 4plexes for house hacking

Soren Loftus
Rapid City, SD · Member since 2023 · 15 posts · 23 votes

Fairview neighborhood in Anchorage

https://www.biggerpockets.com/...

I just completed my first few analyses of a potential 4plexes I'm wanting to house hack. This  first one is in the worst condition, but the best present cashflow. There are two 2 bed units and two 3 bed units. The vacant unit I saw was in rough shape and would need a new subfloor in the bathroom and probably a cosmetic kitchen remodel as well as new paint throughout. Another rented unit I saw was in good condition though. Currently rents total 4400, but market rent is closer to 5400-5700. Seller can't do any repairs but is offering 5k towards closing costs. 

Midtown Anchorage

https://www.biggerpockets.com/...

This one is -763/month cash flow. Rents total 5135, but could probably be increased to around 6100. Oldest construction, but better maintained than the one above and in a better location. Doesn't really need any pressing renovations, just a good cleaning of the common area. Newer roof, fenced yard and carport for each unit with a garage for one. 

UMed District Anchorage

https://www.biggerpockets.com/...

This last one is -847/month, but by far the best location. Much larger square footage and highest potential rents. However the largest unit (and the only one I saw) was trashed and needs new flooring, new cabinets and some hazmat level cleaning. Rents right now total 5370, but could probably be closer to 6700.

Just based on cash flow, the first one is the obvious winner, but will require the most updating and is the least favorable in terms of actually living there myself for a year. The second two even after raising rents, only cash flow a couple hundred dollars/month, which makes me question why I would go through all the headache of this plan just for that? Is this really the best path to financial freedom? Freedom being the key word here, so I'm worried about the headache of renting to this low income population based on statistical stereotypes. And all of these numbers assume I'm paying myself market rent for my unit as well. Would it be better to just move to find the cheapest rent I can in the area and save the difference for a larger downpayment next year? Or maybe I should look at investing long distance in the Midwest?

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Anthony Salazar
Salt Lake City · Member since 2021 · 42 posts · 18 votes
3y

Hey Soren, curious how this went for you? Did you end up buying a multi?

I invest in the Midwest but have always loved the idea of owning my own cabin up in Alaska. I’m always kind of looking around up there. 

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    3y

    @Soren Loftus

    i don't know anything whatsoever about Anchorage or Alaska, so i am not going to comment on these specific deals, but here are a few miscellaneous thoughts and comments...

    -what are the purchase prices, estimated rehab amounts, and ARV after rehab for each? do you have cash for the rehab? how much equity would you have after 1 year, 5 years etc. in each?

    -are your projected rents based on solid comps, or just what you would want / hope for?  are you working with an agent?  what do they think?

    -don't start with some random property in the midwest. say you buy an OK deal that you put 25% down on and never see, with OK management, that nets you $100-200 a month, with limited ability to increase the ARV and build equity. what does this get you?

    -even if you are house hacking, if you don't want to deal with tenants, just hire a PM.  yes, typically you self-manage if you house hack to reduce expenses, but nothing says you have to.  if you want to leave management to the professionals, do so.

    2Reply
  • Jon Schwartz
    Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes
    3y
    Quote from @Soren Loftus:

    Fairview neighborhood in Anchorage

    https://www.biggerpockets.com/...

    I just completed my first few analyses of a potential 4plexes I'm wanting to house hack. This  first one is in the worst condition, but the best present cashflow. There are two 2 bed units and two 3 bed units. The vacant unit I saw was in rough shape and would need a new subfloor in the bathroom and probably a cosmetic kitchen remodel as well as new paint throughout. Another rented unit I saw was in good condition though. Currently rents total 4400, but market rent is closer to 5400-5700. Seller can't do any repairs but is offering 5k towards closing costs. 

    Midtown Anchorage

    https://www.biggerpockets.com/...

    This one is -763/month cash flow. Rents total 5135, but could probably be increased to around 6100. Oldest construction, but better maintained than the one above and in a better location. Doesn't really need any pressing renovations, just a good cleaning of the common area. Newer roof, fenced yard and carport for each unit with a garage for one. 

    UMed District Anchorage

    https://www.biggerpockets.com/...

    This last one is -847/month, but by far the best location. Much larger square footage and highest potential rents. However the largest unit (and the only one I saw) was trashed and needs new flooring, new cabinets and some hazmat level cleaning. Rents right now total 5370, but could probably be closer to 6700.

    Just based on cash flow, the first one is the obvious winner, but will require the most updating and is the least favorable in terms of actually living there myself for a year. The second two even after raising rents, only cash flow a couple hundred dollars/month, which makes me question why I would go through all the headache of this plan just for that? Is this really the best path to financial freedom? Freedom being the key word here, so I'm worried about the headache of renting to this low income population based on statistical stereotypes. And all of these numbers assume I'm paying myself market rent for my unit as well. Would it be better to just move to find the cheapest rent I can in the area and save the difference for a larger downpayment next year? Or maybe I should look at investing long distance in the Midwest?


     Option 3, and live there for more than 1 year.

    Real estate is frustrating when you focus on the work. It's a baby-steps game that compounds over time. With that in mind, you're doing your future self a favor if you buy quality property in desirable locations.

    Buy Option 3 and live there until you have enough saved for the next multi in a quality location.

    You won't achieve financial freedom tomorrow, but it's very likely that this strategy will give you financial freedom in ten years.

    Good luck! You can do this!

    Best,

    Jon

    0Reply
  • Keenan Fitzpatrick
    Flipper/Rehabber · Anchorage, AK · Member since 2017 · 223 posts · 177 votes
    3y

    First we need to define what a good deal is to you. I'm talking about different locations within Anchorage and different property types in different price points and different conditions. Right now, cashflow has been reduced due to prices and rates increasing. Rents as well but they aren't always implemented by the current owners. Which is one reason why those deals are in negative cashflow.

    0Reply
  • Anthony Salazar
    Salt Lake City · Member since 2021 · 42 posts · 18 votes
    3y

    Hey Soren, curious how this went for you? Did you end up buying a multi?

    I invest in the Midwest but have always loved the idea of owning my own cabin up in Alaska. I’m always kind of looking around up there. 

    3Reply
  • Colin Phillips
    Member since 2021 · 6 posts · 5 votes
    3y

    Hey Soren,

    Also interested in how this went for you?  I'm currently investigating house hacking in Anchorage myself, and would love to hear about your experience!

    Cheers

    1Reply
  • Konstantin GinzburgPro Member
    Member since 2021 · 376 posts · 242 votes
    3y

    It's hard for me to comment to much since I am not familiar with the Anchorage market so I do not know what would be considered a decent cash flow for a property in that city. From my personal experience though, I have had the best luck with targeting the best areas rather than the best houses to invest in. I would rather own the worst house in a nicer neighborhood rather than the best house in a bad neighborhood. If you are able to house hack those properties and you are suggesting that you can increase rent to the point where you are making 100-200 in cash flow (I'll assume you ran all your numbers accurately); then the advantage that house hacking is that it gives you the ability to eliminate your largest monthly expense (housing). Not only that, but you actually turning what is the average person's largest expense into a cash flowing asset. 200 per month is still 2400 at the end of the year that you would not have had otherwise. There is no single property anyone can acquire that would net them financial freedom with one swing. Real estate investing will require a series of small steps and long term planning before financial freedom is achieved. View this as a first step that will allow you to subsidize your living expense, have an introductory course in land lording, and place the money that would have been spent on rent into an account to begin saving for the next property. Also make sure that whatever unit you plan on living in, is one that you will be comfortable living in. I think house hacking does need to strike a balance between financial milestones without causing too detrimental of a life style. 

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