SFH Opportunity - Seeking Advice for House Hacking and Creative Strategies

[Benjamin Sulka]

Hey BP, 

I've been discussing my real estate aspirations with my family and personal network and an opportunity presented itself in no time. 

A relative of mine has a 2/1 SFH that they've been renting to a family member for 2 years now. Things have started to go down hill and the tenant is moving out once their lease is up in early summer 2024. These relatives of mine are highly motivated to sell but don't want to sell until their family member moves out. This fits my timeline perfectly since my goal for this year is to save up money and pay down debt.

This property has central air, dishwasher, a solid kitchen and bathroom as well as a view of Lake Erie. My significant other and I want to live in the property for a year and house hack while we live there by renting the other bedroom to someone we know and trust. After this, we want to either sell it or turn it into a full time rental. 

I've been looking at rent comps in that area and 2/1s rent for $1,300 with appliances but without central air. This property has central air. Trying to find extra opportunities to value add to increase the rent once we are finished with a year of house hacking. After considering all expenses (mortgage, vacancy, capex, maintenance, home insurance, PMI, etc.) the property would negative cash flow. I could offer them less than they want for the property (like I said they are highly motivated) but I'd be giving them less than what they still owe on the property.

This property also has an additional lot that can be sold or built on. I love the ADU strategy but I don't know if it would make sense to put all of that money into building one.

Would love to hear the thoughts of other investors who have rented SFH's.

All the best,

Ben

[Alejandro B Yoon]

The reality is not every deal works, even if it it's from family.

Also for a househack, the more units the better when renting out rooms/units. A 2200 sq ft house with 5 beds will make a lot more money than a 3 bed house the same size. If the space allows it, maybe consider building another room? That would also increase the rent when you leave.

From what I have seen, ADU's typically don't make sense to add unless you are in dense HCOL cities, where more housing is needed and the expensive cost of construction is immediately recouped as equity. Most of the Midwest doesn't follow this trend.

I would also consider just representing your family member in the sale and using the commission to save up even more money when the right opportunity comes

Keep us updated and best of luck!