All Forum Posts by: Brian Cheng

I am trying to buy my first multi so i can house hack but with the current market i am not seeing any multis on listing that appear to be in an area that i'd feel safe walking around at night. are multis by default a lowering income associating properties in general and thus i should lower my expectations? or Start out with a SFH to learn the ropes with? I'd love to get a multi so i can hack it and learn how to be a landlord at the same time, but I am hesitant on living in areas that seem sketchy just to get a cheap deal. (Location: Houston,TX)

Also, since it the tenants already settled in and paying rent. Do i still need to do inspections just as if im buying a new property? or is it simply a transfer of ownership?

thank you for the reply. So i would be doing a 20% conventional loan. I am simply wondering if i should just buy this property for the cash flow, then continue to rent until i find another property for myself. or forgo this property altogether given it's my first time. One tenant's lease is month to month but has been there 6 years, other is 10+ yr old tenant that just renewed his/her lease.

So i came across this duplex and it costs roughly 270k to purchase. both unit occupied with tenants already. Tenant A current rent 1300, tenant B current 1250. Both in the house 5+ years, and never late payment according to seller. Tax roughly 4500 for 2018. and 1700 for insurance, tenants pays all utilities/mantenance. This seems like a house already cash flowing+ ( calculation shows roughly 400 a month if i pay listing price assuming no rehab required, everything sold/run as is)

The thing is, im looking for a place to live in myself, and so if im looking to take over this property, i'd have to evict one of the tenant which from what i've read is a nightmare, this is my first time buying so i really don't want to mess with what's already working smoothly. So im wondering if i should go ahead and get the property , then continue to rent and use the cashflow to offset part of my rent until i find another residence. Or simply move on and look for another multi to househack in.

edit: I know if i continue to pay rent it is basically a negative ROI at first, but im thinking it would be a good way to dip my toes into REI because it is already a well run machine and i can start learning how to landlord as everything's already set up in place. (no rehab required)

Thank you all for the input. For my current situation i definitely prefer to get a place that id live in( would probably look to breakeven worst case scenario or perhaps a minor loss in the beginning). Then perhaps the next property i can look into  a higher cash flow stream vehicle.

Yes exactly! I am not sure exactly how i should approach this because this is technically not "an investment" even though it is, eventually.

I guess i'm really looking to just own a home right now for myself, so I have to prioritize my needs a lil differently than if it's just going to make money passively right now. In my opinion, if i'm not overpaying, and it doesn't give ridiculously negative cash flow, given enough time(because i'm paying down mortgage, i will plug it into calculation and see how long it takes to cash flow obviously) it will cash flow positive. So i'm just trying to think ahead to see how good of a deal i can get when turning my home into an investment, i guess there's really no good ways to tell.

 @Joe Villeneuve thank you for taking your time to answer my question. My question is based on the theory that good school district will attract higher/more stable income families that have kids with parents wanting their kids to attend the best school possible. Thus making it easy to rent( less vacancy time.) I understand your point about ARV not automatically go up just because the house is in a good district, but comparing to a bad district, the chance is higher.(Maybe this type of thinking is completely wrong, and i'm not in the game long enough to know, or it just makes intuitive sense but in reality doesn't work this way at all)

Another thing about it is, im not planning on renting it out right away because im planning on owning it as a home for at least a few years.(might lose money, but i'd rather lose money here than just losing money on rent and own nothing) 

My thinking is it might be more worth it to find a property in a safe, good district where i feel safe living in myself, because i am living there. Then the process of renting might be easier down the line just because of the location is more desirable. I am not betting on appreciation of the property by any means even tho there's a good chance of happening.  I guess my question really is: is it a safer bet to get a property that breaks even in Cash flow( might even be net negative in the beginning ,as long as it's not a lot and my paycheck can well cover it) then later down the line as i own equity in it, it will cash flow positive + being in a good location  VS  Poorer, less desirable location that has a little bit better cash flow(realistically, maybe not much more, but more than the first scenario) which i might feel less comfortable living in, and having a tougher time renting later down the line because tenants might feel the same way.

I am having a dilemma on picking the proper location for an "eventual rental" Currently I am looking to pick a primary residence for myself as I do not want to pay rent anymore. My current job gives me the flexibility to be anywhere within the city that i am in currently(Houston, TX) it is really up to my personal preference as to where i want to be or how close to the city i want to be. I've read that when it comes to rental properties, the Class C/D areas tend to produce higher ROI overall but obviously they are in a less desirable area. Better districts with better schools might produce better tenants/higher appreciation in the long run, but obviously I might have to buy at a loss initially (I might end up losing in the beginning anyway as i will be the one paying mortgage, it's not a straight up rental) Also, those areas don't really have any fixxer uppers(not major ones) so the pricetags basically give no margin and you will basically buy at a loss/breakeven deal.

So i am having a tough time debating between "Good school district" vs " cheaper/potentially better ROI but bad school district locations"

Appreciate any input on this matter. Again, this is a property i foresee turning into rental property eventually as I am simply trying to own a home for myself right now.

@Brian Alfaro thank you so much for your input! Yes, your last paragraph is basically what i was asking. Due to the areas that im looking at mostly max out on rent about 1300-1500 a month. Anything above a certain purchase price (150k-200k) is very hard to have positive cash flow. I guess I need to switch my mindset and not focus on the first year CoCROI because it's mostly likely going to be negative (I think i've watched too many deal analyzing videos that always end up with unrealistic positive first year ROI thus making me think anything not producing positive COC is not a good deal, unless i can get the house for nearly 50% off or something)

(I was mainly focusing on COCRoI when it comes to deals, i understand there's a differencec in CoC vs overall ROI.)

I just started to practice analyzing deals ( used up the free 5 trials for rental calculator, so basically made an excel using old youtube videos on the 4 block technique figuring out CoCROI. )  What i've realized for my area ( Houston, TX) is basically anything over 130k basically produces 0 or negative CoCROI because ultimately your rent is the total income you get and subtract expenses(which usually adds up to around 700-800 bucks be conservative) and your mortgage(which would be around 500-600 bucks a month for a 100k-130k loan)

most of the homes near Houston average (base on craigslist, rentometer, realtor.com) 1300-1600 on rent for a traditional 3/2 SFH. Which means if i pay anything over 100k (assuming home's move-in ready, with everything function, even throw in a conservative 5000 cosmetic rehab cost) my CoCROI is already in the negatives..In my case my current goal is to move out of apartment renting so i can start owning some equity, so the ROI is not determining my buy, but I just want to know the general consensus on this matter. Is this the reason why people are saying there's almost no good deals right now because unless you can scoop up a home for pennies on the dollar as a fixxer-upper most likely, it's very hard for you get any sort of decent return? (CoCROI)