New to RE investing - want to house hack, and have some questions

[Helena Wu]

Hi everyone! I'm a young professional (<25) and am trying to plan a house hacking strategy I would start implementing in 2023. I'm reading The House Hacking Strategy book and trying to determine the best ways to prepare to do this. House hacking would be my absolute first ever foray into real estate investing or rental.

I currently live in a state in the northeast with my parents. I feel like in the long term, I want to live in the city in the south where I went to college: two of my friends are currently there, and it would be very nice to be around young and diverse people again near the college campus. So my first uncertainty is that I'm not sure if a property manager would be able to help me manage properties in state A (where I am currently, if I do my very first house hack here) and state B once I move there for my 2nd or 3rd house hack and onwards. Must property managers be local to the properties they're helping you manage? If I want to live in state B long-term, does it just make sense to start my first house hack there rather than around here where I live currently, so that a property manager down the line can help me manage everything in that area?

Secondly, I have a 700+ credit score. I do have $18k, but that's all in the stock market right now, not in liquid savings, so I'm considering that untouchable. 😂 If I start saving so I have $15-25k sitting in a high APY savings account, what kind of loans or financing can I use? In The House Hacking Strategy, it mentions that FHA loans might not be the best for single family properties, which is what I intend to do (and rent out the rooms).

Thirdly, what are the key calculations that I should know and understand for assessing a potential single family house hacking home? Are these figures that I can get data from just from Zillow/Redfin/the listing, or do I need to have reached out to and talked to the seller/agent? I'm already researching some properties in the area I live right now but I currently don't feel prepared to actually talk to a seller or agent.

Lastly, in my current research in my area, I'm looking at properties that are <$400k and have 1600+ sq ft (because I don't want to live in a small house with 2 other people lol). All of these houses are built in 1900-1980. From the pictures, I don't really like the way many of them look – I think I'm biased toward houses that are built after 2000, because I assume they're higher quality, nicer to live in, and I guess would be less prone to breakages. But is this a misconception? 

Thanks so much for any input! :)

[Ian Hogan]

Hi @Helena Wu,

I'd say you would usually want a manager that services the area of your rental, since they will have to deal with maintenance, lease agreements, and misc. tasks. Either way they would have to have someone local. There is benefit of having your properties under one management group such as possible lowered costs and good management (assuming you have or find a good group).

You would have options to FHA, 203k (renovation loan), and conventional lending for home occupiers can be down 5% downpayment. Depending on the state they may also have some programs such as first time home buyers, but you can find that out by talking to a lender that services the area you intend to buy. FHA will have some restrictions depending on what your plan is, (e.g. usually you are unable to airbnb in an FHA property, at least for a year or so) However, you can rent out the rooms to tenants.

Some key figures would be to calculate your cash on cash return on investment (CoCROI) and your cashflow. To feed these values you will need the basics of potential rents in the area (can look into current listings, a tool like rentometer, HUD Fair Market Rents, or a local agent), taxes, debt payment for your mortgage, water/sewer, insurance, and assumptions for maintenance, capital expenditure, vacancy, and management fees. Many of these are public information or things you can find by talking to agents, property managers, and lenders.

Older houses are/were built high quality, just different in many cases. There are the exceptions of asbestos and lead paint but that depends on area and can all be addressed. If the visual appeal is the issue those are usually cheaper things to address with paint, molding, and cabinets. Many areas have cheap loans or free loans as options to address the issues of energy efficiency that many homes have like insulation, heating and cooling systems, electrical and paint. This all depends on area, a good agent can help make you aware and don't skip on your home inspection. There are issues with newer homes so I wouldn't necessarily just write off older homes.