All Forum Posts by: Ben Einspahr

One of the most common house hacking strategies in the Denver metro area is the Airbnb House Hack. That consists of buying a single family home with some form of separate living space to rent out as a STR and help offset living expenses.

The Downside

• Lenders Calculate STR/MTR Rental Income Differently- From a lender's perspective, any rental income received on a term less than 12 months is NOT calculated the same way a traditional long term rental is.
• FYI-  for a long term rental, a lender will consider the income right away (75%) if there is a signed lease agreement or an appraiser' estimate 
• STR/MTR Income Must Show Up On Your Tax Returns- Before a lender can recognize that income for underwriting to offset your DTI, they must see it reported on a schedule E on your most recent tax returns.

So, What Does All Of This Mean?

If you purchase House Hack #1 (an Airbnb House Hack) on January 1, 2023, you cannot purchase House Hack #2 until you receive your tax returns back in early 2024, assuming you need that rental income to offset your DTI.

What's Next?

• Report Your Income!- Properly document your rental income on a schedule E and report it to the IRS.
• Connect with an Investment Friendly Lender- Not all lenders are equal. Connect with a lender familiar with your investment strategy to set yourself up for success and continue building your house hack stack.

I recently interviewed a local lender to dive deep into these details and talk about all the nuances. Happy to share the recording.

@Jennifer J. Allran as others have mentioned, connect with a few different lenders to see what your options are. You may be surprised with the range of answers your will receive.

Lenders seem to roll out the red carpet for clients with a W2. Self employment... not so much

QUICK TIP: if you are planning buying a property the following year, talk with your lender first before filing your taxes

@Bruce Tieu congrats on the recent closing again! 

Based on your rental strategy and capacity of tenants living there I would go with the larger water heater. 

With this being your first big expense, I would recommend getting 1-2 more quotes. I'll DM you some referrals

Additionally, some good points were brought up. How are you handling your utilities?

@Xavier Leal Lots of great feedback already in this thread. Being a newer investor, would give house hacking a strong consideration. 

When I look at overall success rate for newer investors executing on strategies, house hacking has one of the highest conversions when compared to all of the other strategies out there (traditional rentals, wholesaling, flipping, brrrr, etc).  Simple to execute on and low (relatively speaking) capital to invest.

If you are a visual guy like me, here are some cool property walks BP did with some local house hackers in CO!

@Jason Wu. @James Carlson

the only way I have heard people getting caught are 1 of 2 reasons
1.the city looks through local STR listings and checks to make sure they all have active license numbers posted

2. Unhappy neighbors complain to the city and turn you in.

@Niall Clancey excellent work and discipline boosting the savings! House hacking for some time my main piece of advise keep your options open to other property types other than multifamiles. Room by room rentals are a great way to start out. If you are dead set on needing privacy, you can find a single family home with some form of carriage house/ mother-in-law suite you can live in and rent out the rest.

Earlier this year I did 6 part webinar series on house hacking in our higher interest rate environments with case studies and interviews with industry experts. Mainly focused in Denver but same principles apply in other markets. Happy to share the recordings if you want… let me know

@Sharlene Ko, this is an excellent question. I always though the same thing when first starting out because I did not want to give my bank account a false since of improvement. 

But... as years passed, I always seemed to revert back to my old principle of Keep It Simple. 

So for me personally, I keep everything in one checking account for that rental property (rents + security deposits). 

If this is your only rental and you wanted to get technical, you can open up sub-accounts (if your bank allows that). That way you can do 1 of 2 things:

1. One location for rents and another for security deposits

2. sub account for each renter.

The downside to this is that it can be very administrative heavy and it is not scaleable after you start having multiple RBR rentals IMO. 

Best of luck!

@Tom Sehon I am going to kick off my response with a very common answer... It depends :) What are you really looking to get out of the LLC? Asset protection? Separating yourself from the asset? Will this be the first of many?

The first thing to know is that your first line of defense is good insurance. Any good attorney will tell you that is familiar with the concepts of real estate investing.

I actually set up a trust along with a holding co LLC (not cheap but worth it). This insures all of my current assets and future assets will not get stuck in probate if I pass. Each one of my rental properties have their own special purpose entity LLC.

House hacks that I am currently living in are not under any LLC. Only after moving out.

Happy to introduce you to the professionals I worked with.

Also, this is a very common question I see on the BP forums. For that reason, I interviewed the 2 professionals that set up my business structure and asked them these questions. Happy to share my notes/ recording with you. Let me know.

@Gomez Agou financing for a multifamily gets tricky when it is your primary. 

Duplex House Hacking- FHA will be your best bet as you can still invest with just a 3.5% down payment. If you do not have access to an FHA loan, you will have to go with a conventional loan, which requires a minimum of 15% down payment even if it is your primary residence.

Triplex and Fourplex House Hacking- This is even more challenging! If you are planning to owner-occupy, your only option is an FHA loan. However, the home must pass the self-sufficiency test. This means that 75% of gross rents must cover 100% of the mortgage (principal, interest, taxes, and insurance). 

If rents do not cover 100% of the mortgage, you must put down a higher down payment until you pass the SS test. In the Denver metro market, that could be close to 18% downpayment. When it is all said and done, you could be out of pocket $150+.

@Alfredo Sanchez I think you will have better luck if you start your search back up between halloween and new years. In the Denver Metro market, that is when we have seen the most opportunities. Typical homes that are being sold are by families. Not many families are wanting to sell during the middle of the school year unless they have to.

I would stick with option A, the house hack in your back yard vs. the out of state STR. Much higher probability for success.