How to analyze and is this realistic?

Question

Hello, I’m living out in the charlotte area. My roommate and I have our lease up in the middle of July. I’ve expressed interest in looking for a place to house hack. Not sure what resources I should use to make sure the property is profitable and also not sure if my timeframe is realistic as well. Open to other ways of accomplishing the task and helpful hints on where I should start analyzing. Ideally looking for small multi family properties but single resident houses is an option as well. Thanks!

Ryan Thomson · Answer

Similar but not as good ;)

Keith Fitzpatrick · Answer

Hey, Shay! That's awesome you're investigating the vast opportunity of house hacking. You technically have time but you also never want to be in a rush when it comes to investing into real estate, especially your first deal. I was in the same situation and I started doing the research in February of 2021 and after a few declined offers, I purchased my first home as a house hack in September of 2021. However, the average time to close using a conventional mortgage is between 35-47 days. Doing your research early and having a broad understanding of the many moving parts of real estate, will give you the best advantage and ensure you're moving forward with a great deal. Additionally, understanding the local rental market and potential profitability of each home you consider, will give you the best opportunity for building a multi-layered, plan for long-term success. For instance, Is the home in a destination hot-spot for short-term rentals like Airbnb and VRBO and or is it in a thriving, long-term rental market? Is there a garage that could be converted into an ADU or used as additional rental space to neighbors and is the driveway functionally obsolete for more than 1 tenant? There are many questions that online-tools or local agents can assist you with to better understand your local rental market and analyzing property value. Just keep asking questions and seeking advice! For now, here is a basic-outline of the necessary steps to finding your house hack opportunity...(Recommended): Find a trustworthy, local agent to work with.1. Start budgeting, understand your loan options & get pre-approved2. Use filtered searches and run the numbers to qualify homes3. Ensure your plan aligns with the city's code and local legislation4. Setup showings/ attend open houses to finalize your analysis5. Strategically offer on properties to make it work6. Ensure you're meticulous and confident with your inspectionNow, this is a broad overview of taking the plunge into real estate investing but remember, this is only the surface of a deep sea of ever-changing responsibility and emotions. Preparing yourself mentally and having a trusted, knowledgable agent at your side can go a long way, especially when it comes to first time home buyers. You're doing the right thing by asking questions and seeking advice, which is huge! Keep that up and I'm sure you'll get the answers you're looking for. Best of luck and I'd be happy to expand or answer any question!

Shay Nolan · Answer

@Ryan Thomson

Hey Ryan! Is there a similar spreadsheet on BP that provides similar numbers to what you utilize?

Shay Nolan · Answer

@Tanner Pile

It would just be my name solely on the property. Seems like multi family is pretty scarce in charlotte. Not without any property with some renovations. I still am looking on the website for a spreadsheet on BP that provides me good hypothetical numbers. Only one I found was the BRRRR Sheet

Ryan Thomson · Answer

@Shay Nolan

When looking for a good house hack I consider a couple things.

1. Will it reduce my cost of living when compared to renting?

2. What is my net worth ROI on my downpayment and is this better than another investment opportunity.

Your Net Worth ROI calculation takes into account the appreciation, loan paydown, tax benefits, and the rent avoidance (the difference in what you pay towards your mortgage compared to your rental situation). The total of that number over the year divided by your 5% down payment is your net worth ROI. Because you are getting the home for 5% down and hopefully holding for the long term, you will almost certainly be get a better ROI than the ROIs you can get elsewhere in the investing world.

That is what I look for. Now, how do I calculate that? I have a great calculator to help figure this out (see image).

The inputs for the image in this screenshot are as follows:

500k purchase price duplex.

Rent each side for 2k/month (this is after you move out)

5% down payment

Closing costs: 7k

6.4% interest rate

Insurance: $250/month

Utilities (paid by owner): $400/month

Vacancy budgeting: 5% of monthly rent

Maintenance budgeting: 8% of monthly rent

CapEx budgeting: 7% of monthly rent

Even though you are negative $312/month after budgeting for future expenses your net worth ROI is massively positive. Real estate is one of the best ways to build long term wealth. And house hacking is an incredible hack to get started with only 5% down.

Scott E. · Answer

There is a ton of information here on the forums and in the biggerpockets podcasts for you to study on house hacking.

It's a great strategy. I used it to get started myself (bought a 3 bedroom house and rented out the extra bedrooms).

You'll have a harder time in this market finding a house hack deal where your tenants / roommates pay for 100% of your mortgage. But their rent payments should still significantly reduce your overhead.

These are the loose steps I'd follow if I were you:

1. Spend the next few months reading everything you can about house hacking here on BP (and listening to the podcasts)

2. Talk to a mortgage loan officer to figure out "how much you can afford"

3. Pick an area that you would feel comfortable living in AND that you see has some growth potential over the coming years.

4. Start running hypothetical numbers on properties, and bring those numbers back here to the forums. We can give you feedback on if it looks like a good deal or a pass.

Tanner Pile · Answer

@Shay Nolan

Would you buy the property with your roommate? or have her by a tenant in your house hack?

July is plenty of time to get it organized. Every day practice running your numbers so you can get a better feel and speak with a lender to see what your purchase price would be looking like.

With multi-family don't forget you can use the other units to help you qualify for the purchase price as well!

Best lenders to work with are the ones other investors are working with in your local market. Good luck!

Nazanin Boojar · Answer

Hey, I can help you analyze properties in your chosen location and find the best deals.

But, of course, I suggest looking for other locations with higher cap rates to pay off the mortgage. Being biased about where you live can harm you big times.

I can help you find better locations and top properties for house hacking (for free of course). So feel free to DM me.

Hunter Reed · Answer

Analyze, use the Bigger Pocket's tools to help you in the analyzation process, talk with lenders, and find a good agent. You've got this! Good luck on your investment journey!

How to analyze and is this realistic?

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