All Forum Posts by: Alex Bush

yea, the sad reality is that those are the numbers and most of the time they don't work out with single family homes unless you buy a distressed one and BRRR.

Your assessment and calculations are correct and as @Cody L. said it all depends on the price you buy at.

That said you could, for a couple of years, pour all the profits you make from the STR on your house into paying down the mortgage until the point when your principal and monthly payments are smaller and the numbers start to workout to LTR the property. But the downside is that the technical ROI on capital your pouring into is going to be low.

Hi everyone, I'm a new investor and am still at the house hacking phase with my first single family house here in Houston TX. 

I bought the house a couple of years ago with 5% down payment which or course means I have a PMI attached to my mortgage payments.

Lately my house appreciated in price a lot and I thought I could cancel the PMI since this is what I hear investors, here on this forum and the podcast, do quite often when they get to 20% of equity ownership in the property. In my case I think I'm at ~23-25% of equity relative to mortgage principle remaining.

So I reached out to my lender and was surprised to hear this:

> Hello, we do not remove PMI based on market values. You would have to provide proof of home improvements that would qualify for a new home appraisal from our escrow department. If you are interested please advise.

Are they right and did I completely misinterpret it? I thought I could ask for cancellation of PMI just based on increased market value of the property, not only forced appreciation?

If I'm wrong and it's the "home improvements" that they want to see, can I just make some minor cosmetic changes like new sink/bathtub/paint and then ask them for re-appraisal and since the current market value of the property is much higher it will still get appraised higher and my PMI will be cancelled?

>An HOA is there to protect the look and feel of a neighborhood. If they allowed people to rent by the room, you would have too many cars, traffic, and make the neighborhood look dumpier (you can't tell a tenant who has a crap truck not to park there). As well, if you think that the HOA wouldn't know if you had multiple tenants renting by room, you are mistaken. You have neighbors, and those neighbors don't want a ton of coming and going from a house next door. Even if you have good tenants, they will tell the HOA.

I am not thinking that, I know it will be found out this is why I am researching to figure out how to do this legally so that it's not an issue and that I'm not breaking any rules.

>If the HOA hears about it and enforces it, you are now stuck with the bag of kicking them out prior to the end of their leases. You will most likely have to pay HOA penalty fees, fees by the state if they have tenant rights in place and potential lawsuits from the tenants. When you buy a home in an HOA you are signing a form saying you will comply, and trying to push these rules will only make your life harder. As well, generally not adviseable to "stretch" rules, as you are dealing with people's livelihood.

That is true, again, this is why I'm researching on this prior to getting into this mess. I am not posting here saying "hey, I got myself into this mess, how do I get out??? hoa is evil!!!", no I want to provide good product, cheaper clean furnished rooms to "techies", and abide by the rules as much as possible because I don't have resources yet to fight battles like this.

>This is why you need to analyze the property/area with this in mind. This would be considered a political risk, and you should assign more risk to an area with more rules. If you aren't familiar, your expected return, aka discount rate, is determined by three areas; 1) risk-free rate (aka 10-year treasury bond) + operational risk (aka political, tenant credit quality, state, location, etc.) + liquidity risk (aka are you going to sell it? if so how long does it take to get your money back). Going against legitimate associations and ruling authorities is a game that you will most likely lose.

That's precisely the original inquiry in my post - how do people do it given that most HOAs won't allow it. Seems like the answers: 1) find HOA that allows to have more people, such as 4 under one roof 2) find houses with no HOA. Either option is a good one.

Yea, for house hacking I worry about it way less. It's temporary in nature anyway. My goal is to legally do this on a long term basis as potential cashflow is insanely high despite the management headaches.

The interesting thing is - most of the cities I'm researching on do not have any prohibiting ordinances at all, it's all the HOAs being difficult/draconian.

>I'm afraid not. With absolutely no disrespect, when you rent by the room, you're basically running an unattended rooming house with a full kitchen. This tends to work when you have a specific clientele (students, midterm professionals, etc) or in places with insane rent prices.

What's wrong with it? It is of course would be more work to manage, I understand that. 

>I wouldn't personally choose this model in Houston, as a more down-market clientele would be more expected since rents aren't that bad and with them comes the kinds of problems that you don't want in an unattended rooming house. Even Austin would be better. What exactly is your model there?

The problem is I can't find anything decent that would cash flow positively in this market. Average math turns out like this - ~$250k single family house, $1900/month average rent. This is not a sound investment to make as it would not cash flow positively (with property management company, reserves for repairs and vacancy, etc.). The criteria I have for searching for a house is more or less good condition, good neighborhood, and houses no older then 20 years old. These criteria due to my personal constraints on time (I have a demanding full time job as many of us do) and on connections/team/expertise(I'm not an expert at rehabs nor do I have a team for this yet).

So given all of that I am researching on other clever ways of hacking the situation and conditions I'm in to still come out ahed so splitting houses I purchase up into multiple "doors" by renting by the room is a natural conclusion. I am a "techie" and I am targeting other "techie" clientele - i.e. people who need a quiet place to work remotely (with great internet speed) or who are in the beginning of their IT/desk-professional-job career and need an affordable furnished place for a few months/years. Another group I'm considering target is traveling nurses. I very much do not care for turning this into semi-section-8 type of housing. And this is how I started to wonder about all of those stories of wonderful returns renting by the room.

it all makes sense. Do you know how multi-family houses legally operate? Or each individual unit in a dubplex/triplex/fourplex/etc. is considered a standalone dwelling unit and these number-of-people-under-one-roof-restrictions do not apply?

Yea, that's what I started to do - go through HOA rules for each prospective house I want to buy. So far no luck unfortunately. Do you have any recommendations on how do this kind of research more efficiently? It's very hard to get those rules PDF docs and many HOAs don't even have a website and leave a phone number. For some I can't even find a phone number ....

That's literally what 3 different realtors told me but I still don't believe in luck and good human behavior and want to protect my rear with legality being on my side :)

Hi, I am very puzzled. I am researching on how I can rent out single family houses by the room but it seems like every single HOA rules and regulations prohibits this. I'm in Houston TX area.

As far as I can tell every HOA document has something like this one form or another:

The term "single family residential purposes" also shall be defined as: (1) one or more persons related by blood, marriage or adoption, which may include only parents and their dependent children, siblings, parents or grandparents; or (2) by no more than two unrelated persons living together as a single housekeeping unit and their dependent children, siblings, parents or grandparents.

See Article III Section 3.1 here as an example: https://1drv.ms/b/s!AneU_VTSiG...

I'm reading this as - you can have either one roommate if you live in a house yourself or you can have two different people rent out two rooms in your house but that's it, you can't say get a 5 br house and get 5 roommates in.

So I do not understand how people can possibly be renting out houses by the room but I keep hearing about on BP podcast and other places?? What about student housing??

I am not talking about STRs (short term rentals) - airbnb is a whole other can of worms and I understand that there are a lot more regulations and rules there on city and state level. But how come it seems to be so impossible to rent by the room without a hanging threat of HOA lien over your head?? How do other investors do it?

Thank you for any piece of advice and wisdom in advance!