Hey @Rob Ferdinand
I did a house hack in 2013 in Somerville
In my opinion house hacks follow different rules. Now I know that I was very lucky to buy something in Somerville in 2013 but I think what has worked for us can still work now.
I’d say first off throw out your 50% or 1% rules or anything like that for now. All you should care about is “how close can I get to living here for free”.
Being able to put only 5% down, even if you don’t end up living for free if you come close that’s a huge win! That will change your financial life.
The Boston area goes up every year. Maybe not this year with Covid but we have consistently raised rents every year by 2% with zero push back. I also invest out of state and that is not the case. That section 8 house in Kansas City that rents for $950 will still rent for $950 5 years later. Yes you can’t count on appreciation but you also kinda can? I’d say that even if there is a non appreciating year the market is too hot for it not to continue. I know a friend who is buying and he said even during Covid it was crazy- just 10 offers instead of 12 on a property in Boston.
The people who have posted about property management are 100% correct. You should be self managing both because it’s not hard and also you will live there. It’s important to learn how to do this yourself. Unless you are moving out of state you can also still self manage even from the next town over no problem if you move out and buy another. As someone mentioned most tentants pay via Venmo like clockwork and occasionally you have to walk downstairs and fix a garbage disposal...
You don’t need to search for some off market thing but you do need to be willing to go for the house that needs a bit of work. I’m not handy in the least but anyone can learn how to paint or worst case just calling and managing contractors and subs is it’s own skill set. Fix it up slowly over time as you live in it.
The huge thing for us to create cash flow was a long term value add. So since Boston is always going up you should be looking for where you can squeeze an extra unit in, in the future. This means looking for basements that could be finished, larger lots, knowing what the short term rents laws for the city are. I have a friend who Airbnb’s in Salem and he does amazing (pre Covid and hopefully in the future). My point being if there is a way to create another unit in the future in the current layout you just created the best investment ever.
Also I’ve said this before and still believe it... if you have any vacancy at all in the Boston area you are doing something wrong. People need and want to live here and there isn’t a ton of affordable (I mean non brand new A+ condo building) inventory. If you time your leases to start on sept 1st I just don’t see how you have vacancy. We have never had any ever in 7 years. We were even running an Airbnb when Covid hit- everyone cancelled and the next day we had a traveling nurse in there month to month. You want general reserves and maybe you get a bad non paying tenant but we’ve had zero vacancy.
To sum up my suggestions:
-forget the number rules in appreciating high priced markets they don’t apply
-Self manage
-There shouldn’t be vacancy if you manage and time your leases correctly
- Your repairs should be low too if your living there and at least trying to fix it yourself first. A house hack is all about sweat equity. You will get to know Home Depot well.
- Buy something liveable but that needs work. You should be targeting the props on the MLS that have been sitting for a bit because they do need a bit of work. I'm not talking guy Reno just outdated.
- Try and see how you can create another unit, Airbnb a room in your unit, finish a basement? An additional bedroom you come add is gold down the line. Keep this in mind when buying - this is something I lucked into.
- A house hack that covers your living costs is, in my opinion, the single biggest thing you can do for your finances. My wife and I are starting our retirement and decreasing our days at work at age 41 next year all because of a house hack we bought 7 years ago and through all of the additional investing we were able to do because of not paying any mortgage - essentially using all of that money to invest into other real estate. Don’t let the numbers freak you out but also be ready to put the self managing and basic repair work in yourself to make it cash flow.
