All Forum Posts by: Christopher Giannino

Bad News: it sounds like I missed a really great and informative weekend! :(   

Good News: everyone who attended seems to have gotten a lot out of the Summit and there are plans of another event next year!  I'll make sure that I don't have anything planned for that weekend and if I do, I'll be clearing my schedule so I can definitely attend!      

@Peter Tverdov

Just out of curiosity, what kind of returns are you making on your college rentals here in NJ?  Also, what are you budgeting for repairs and cap ex...  Are they typically higher because of some of the cons you mentioned above?

You've gotten a lot of information about FHA and the advantages of house hacking so I want to speak of the 2nd part of your thread title "And how to run the numbers"

Personally, I would run the numbers of the property two ways..   with you living in the property and with you NOT living in the property. 

The first way, with you living in the property, will be a good barometer of how much you will have to pay out of pocket (if any.)  The thought here is if you're living in one of the units, you will not be collecting rents on that unit.  Let's just say you purchase a duplex and your mortgage is $2,000 a month..  If you're house hacking and can only rent out the other half for $800 a month, you would have to pay $1,200+ a month to live there (2,000 mortgage expense - 800 rent coming in = 1200 mortgage expense you have to kick in + whatever other property expenses.)  Will that be cheaper then just renting or buying another property in the area?  If not, maybe house hacking isn't a good way to get started with investing because it will cost you more.

The other way you want to run the numbers is once you eventually move out.  By now being able to collect the two sides of rents, is the property actually profitable?  Does the property give positive cash flow?  

These two ways will help you determine whether the property is a "good investment" or not.  Best of luck and let me know if you have any other questions!

I know many investors out there are using the BRRRR strategy in order to acquire properties with little to no expenses out of pocket. From what I understand, its how many investors are able to scale up. With that being said in most cases for the BRRRR strategy to work properly, you would need to buy a property that needs work in order to force the appreciation to get your initial outlay of cash back.

@Will Dennis

I think there's a couple of things to note about the advantages of house hacking your 1st investment...

1. Qualifying. You need to be able to qualify for the loan. If you go the FHA route (which many house hackers do), I believe FHA will count 75% of potential rents towards your purchasing power so in theory it could be easier to qualify for the loan because you can afford more on paper. If you don't use an FHA loan, some lenders will only count that 75% of potential rents if you have 2 years of land lording experience.

2.  Low Downpayment. Like I said above, many investors start house hacking because they can utilize FHA loans. FHA loans allow for a smaller down payment, usually as low as  3.5%.  If buying a MFH as strictly an investment, many lenders have different overlays and therefore will require a lot more down.  I talked to a lender a couple of months ago and they required a minimum of 25% down on  MFH investment properties. 

3. Rate. FHA and owner occupant loan rates tend to be better than rates on strictly investment properties. Also if you're a First Time Home Buyer, you might be eligible for special grants.

4.  Management.  You're living on site and therefore will hopefully be able to manage more effectively.  You'll see things day to day and might be able to correct things before they become huge issues.

5. Tax Incentives.  There's more tax incentives given for owning properties then renting so you could potentially be missing out on tax breaks.

I'm not an experienced landlord so take what I say with a grain of salt but just thinking about it from a renters perspective...  If I received paperwork to re-new my lease and my rent went up by a couple hundred bucks, I wouldn't be too happy.  Therefore before automatically re-signing, I would look to see what other rentals are out there.  Is there anything cheaper?  Is there something the same price but offers more "bang for my buck?"  On the other hand, if my rent only went up $50 or $75 bucks and I was happy, I would just re-sign without any hesitation.  I wouldn't put forth the extra effort because an increase of $50 on a $2095 rent wouldn't be a hardship whereas a $500 increase on a $2095 rent might be.

At the end of the day, I really do think its market dependent.  Are there lots of rentals out there?  Are there lots of quality tenants out there looking for rentals?  What are other rentals like?  Are they comparable?  What are units of similar sizes renting for?

Hopefully, you find this helpful.  Best of luck!

This is all speculation on my part since like you, I only hold credit cards that are cash back but maybe it's just a mindset thing.  If you have a credit card that only gives you points towards traveling then you have  to travel in order to redeem those points.  Maybe for some people, they would only travel if they could go for free so this would be their way of saving up since it's "found money."

I know in the past, I have saved up my points and had the full intentions to use the funds strictly for a vacation but then decided later on to use it for something else like business cards or advertising or to take my girlfriend out for a nice dinner and then I never went on the vacation.  Had my card only been a travel card then I wouldn't have been able to do that.

I'm curious to see what other people say..     

I agree with what @Thomas S. said. Also, depending on where you are finding these properties could be the reason why nothing is making sense. Right now, many properties are not deals especially if they have been listed on the MLS for quite some time. If they were deals, they would have be bought up already. With that being said there are still deals out there to be had though.. you just need to be able to spot them.

I would say continue analyzing properties to understand and to get comfortable with what numbers look like in your market.  That way when a property that make senses comes around, you'll be able to pull the trigger.

I bought a condo here in NJ which is currently my primary residence but I have the full intention of turning it into rental within the next year or so.  Going into the purchase, I ran the numbers and bought it as if I was using it strictly as an investment property so I knew once I moved out, it would cash flow.  My condo is even going to cash flow with me doing a cash-out refinance (I decided to pull some money out to allow me to put towards my next deal.)  

Is this a slam dunk deal where I'll be able to retire tomorrow because of the cash flow I'll be getting...  no absolutely not but at the same time I'm going to be cash flow positive based on conservative estimates and only have about ~10k into the deal.

Here in NJ, the higher HOA fees are offset by the lower taxes on the condo. All together my HOA fee and taxes are in the ball park of what the property taxes for a SFH would be. I think any particular type of home, whether it be SFH, Condo, MFH, etc, can make money.. it really just depends on whether you can get a good deal or not.