Finding Padsplits in Atlanta

[Ben Firstenberg]

Hello all,

Following my recent post about house hacking, I wanted to write a little bit about investing in Padsplits. We see a lot of clients looking for Padsplit properties and I thought I’d share what we look for.

-- Location

Padsplit works all over town. Folks have even had success in some of the deeper suburbs. So the way I see it there are two optimal strategies for location.

You could buy a property for as cheaply as possible to maximize cash flow. In this case, we recommend being all-in for about $300-350k depending on the total number of bedrooms.

OR

You could buy a well located property for a higher price, and use Padsplit to generate additional revenue. This is more of a long term, appreciation oriented play. Using Padsplit will help cover the higher mortgage for the more expensive property.

The only other note on location: ideally the property is within 0.5 miles of a bus stop. We like to see proximity to transit, as many Padsplit guests don’t have cars or rely primarily on public transit.

-- Parking

You want there to be ample parking, in case your guests do have cars. The best way to accomplish this is with a wide driveway, or a roundabout driveway. Street parking works as well. It’s not a deal killer, but it’s something to consider.

A good general rule is if you’re half a mile from a bus stop, about half your guests will have cars. 

-- Size and # of bedrooms

Many padsplit investors add additional bedrooms. Padsplit requires that rooms be at least 80 SF (preferably larger, as 80 SF is quite small) and have two methods of exit (typically a door and a window). Padsplit also requires a ratio of at least 1 bathroom per 4 bedrooms.

If you’re going to add bedrooms, you’re looking for a house with a lot of common areas. Ideally, you’re looking for a well priced 4 or 5 bedroom home, with about 1700 SF or more. Sometimes smaller homes work, if they have very efficient floor plans.

If you're looking to add bedrooms, you can sometimes tell from the photos on Zillow/MLS whether or not there will be space. In general, common areas that have windows will work. Of course it's always best for you or your agent to see the property in person and to have a contractor who's familiar with Padsplit confirm.

Renovation costs vary based on the size and condition of the house. It’s not unusual to see $50K renovations for investors adding 3-4 bedrooms. Especially if it’s a large house that already needs a little work. You certainly don’t NEED to add bedrooms, but it helps boost revenue.

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That’s about it. The criteria for a Padsplit aren’t super stringent. It really comes down to price, reno cost and potential revenue. 

If anyone is looking for a Padsplit investment, I hope this helps! Please feel free to message me if you have any questions.