All Forum Posts by: Ben Einspahr

@Tanner Pile, I agree 100%. Very challenging having that upfront cash reserves right out of the gate after all closing expenses/ furnishings/ reno and could delay you significantly. Looking back at my first house hack, renovations took longer and were more expensive then originally anticipated. Who would have thought?!?!

However, when I was exiting HH#1 and moving on to #2 I was pretty set on the 6 month reserves for that property before exiting. Again, goes back to the investors risk tolerance. 

@Nilusha Jayasinghe renting out a part of your basement is an excellent strategy to significantly offset your living expenses. As you already know, there are a lot of other savvy investors executing this same strategy in Aurora. Whether that is operated as a STR, MTR or LTR lease agreement. Very easy to find on a quick search on Zillow, Furnished Finder, and even Airbnb.

Depending on who you talk to at the city dept, they can tend to do that. Also, there could have been some simple miscommunication between either parties. Curious to hear what they come back with.

Renting out a part of your basement is no different than renting out a room in you house as long as it meets all general safety requirement (access egress, carbon+smoke detectors, ventilation, etc). Where I have seen the stove trip people up is during the inspection or appraisal process when purchasing the home. Not when wanting to rent. 

I will never advise someone to do something illegal but it ultimately comes down to the investors risk tolerance with some of these grey areas. One of the most common ways people have ran into challenges renting out a part of their home (regardless of lease length) is because of some unhappy neighbors because tenants park in front of their house and they complain to the city or unlicensed STR (mainly Denver County).

This does not directly answer your question but I hope this help guide you in the right direction. 

@Kevin Sobilo Is the LOC against one of your properties a HELOC?

@Julien Jeannot how much of the $100k would you invest into the debt fund?

@Austin Remus you should be able to find 95% of your guests using 2 different platforms. Furnished finder and airbnb (set min stay for 30 days). Exactly as @Melissa Hartvigsen mentioned :) That is how I have operated for 3+ years. Be sure those calendars are synced. I found that out the hard way early on. 

If that is not doing the trick, I would take a step back and look at a couple different things:

-your listing (including photos) pricing. Professional photos go a long ways.

-other similar listings and their pricing. Might be worth give some sort of new listing special.

I have a couple helpful resources (spreadsheets, checklists) I have compiled over the years. Happy to share if you would like.

I was at a meetup the other day, and we were discussing the question, "How much should I keep in reserves for each rental property?". So I figured I would post it to hear everyones feedback

My quick and simple answer is 6 months of PITI (Principal, Interest, Taxes, and Insurance) or $10,000 in reserves for each rental property. Which ever is greater. K.I.S.S.

To date, I still still use this metric. For context I have 3 rentals. Are there times when I dip under that thresh-hold? Yes!

However, there is a tipping point at which this rule of thumb no longer applies. For instance, if you have ten rental properties and $10,000 in reserves for each property, that amounts to $100,000 sitting idle in a checking or savings account. For me personally, that is too much and I would rather redeploy some of that money into other investments. How much money is too much depends on the individual.

Question for the BP community? How much do you keep in reserves for each rental property?

Property Highlights:

• -Low $500,000 price point
• -Northglenn friendly STR laws
• -Garage ADU
• -Great outdoor space
• -Plenty of parking
• -$2,000 to $2,700 rental income potential while living there
• -Cashflow positive after moving out!

If you are interested learning more about this property and see my analysis, reach out!

@Ryan Thomson This is a great reminder! It is easy to assume your lender will automatically drop PMI. That is not the case :)

@Jake Andronico "it was not sexy". Very well put haha. When you tell your friends you are a real estate investor, they want to hear you are investing in flips and cool multifamily properties. Not owner occupied house hacks.  Excited to hear the details of your next success story!

@Devin Voelker Hard to answer if this is a good investment because my definition of good will be completely different from yours. 

Have someone that has been doing this for a few years get a second set of eyes on your numbers. If you post them here, I am confident you will get some decent feedback. I have a spreadsheet that is very user friendly that I have used for all of my HH's. Happy to send it over if interested. 

A couple questions I would ask myself:

What are you goals with the investment short and long?  

Are you good self managing until you can comfortably hire PM?

Where else would you park that money that would give you a more favorable return? You will typically see a return of 75%-150% on that initial investment from my experiance.

Best of luck!

@J.C. Campbell my feed back is purely conceptual base so as others mentioned, make sure there is not any issues with zoning, permits, renting, etc. Example, some cities do not allow ADUs to be rented out if it is not an owner occupied property.

How long are you planning to occupy the property? If this is more of a lifestyle house hack and you will live there for 4+ years, then I feel the investment makes since. 

If the reno takes 12 months and your are looking to move out shortly after, I would look to see what your ROI is on that reno and could that 50-100k be used elsewhere? Maybe on a property that does take so much grunt work and time to get up and running.

If your personal situation is anything like mine with a wife and family and privacy is a must, this could be a good long term investment.