Looking to purchase my first House hack in Atlanta, tips?

[Katlynn Teague]

Good Morning BP!

I am in the market to purchase my first house hack here in Atlanta. 

The first deal I came across was a quad in Norcross, with a purchase price of $700k. The units needed about $20k each to get them up to 2023 standards for rent. Each unit is a 4 bed 3 bath, all units are currently rented at $1,200. However, when I pulled comps I was seeing 2 bed 2 baths more updated being rented at $1,400-1,600. So my thought was I could be able to get more for these units having two more bedrooms and another full bath. Could also padsplit one of the units and make more.  However, the area of Norcross this property is in, is not the most favorable. 

With that being said, I am still on the hunt for a similar property in a safer area, with a return between 8-10%. 

Do you have any tips?

[Laura Shinkle]

Hey Katlynn,

Love that you're looking at multifamily properties! A couple notes:

1. Definitely look around. The more you look at and run numbers on properties, the more the good ones 'float to the top' and become obvious. 

2. Comp the rent with 4 bedrooms, not 2 bedrooms if at all possible. There's a big difference in the tenant looking for a 2 bedroom unit versus a 4 bedroom. 

3. If all the units are currently rented, and the tenant has been there a while, then likely the rent is lower than market rent. 

4.Is the $1200 market rent for the units as-is, where-as if you updated them, the market rent would be more like $1600-$1800?

5. This may be a controversial opinion, but if you're looking at a househacking strategy, I'd don't know that I'd be looking at it with the return in mind. Does the rent you'd get for the other three units pay for or almost pay your living expenses? Would 4 fully rented units hit your return numbers so that if/when you move out, it's a solid investment? Assuming a $1600/month rent for each unit, I think those numbers may be tight given the purchase price? What purchase price do the rent numbers make sense? If it's not ridiculously out of the ballpark of the list price, offer lower and see what happens. 

Bottom line, keep running numbers with different scenarios (different down payment amounts, rent numbers, purchase price, reno budgets, etc) and see what makes sense.