All Forum Posts by: Charles Clark

Quote from @Bruce Lynn:

I think what you want to buy is 4-5 bedrooms, not 3....numbers start to work better with 4 and even better with 5 bedrooms if you can find one at the right price.

Then be willing to sleep on the couch, in the garage, in a tent, in a trailer parked in the drive if you get lucky with roommate #5.

Not easy....but doable.

You are right on the multifamily side though...very tough from what I see to make any kind of #s work on 2-3-4.

I'm guessing in most cases you won't live for free, but heavily subsidize your rent.

I have looked at some properties with more bedrooms but all the ones I have done calculations on seemed to hit the same issue where going to 4 bed / 3 bath increased purchase price significantly and resulted in minimal cashflow improvement. I have seen a couple that were 4 bed /2 bath that were possibly competitive however, so perhaps I should evaluate if 2 bedrooms sharing a bathroom is more rent than 1 bedroom with a dedicated bathroom.
One reason I have been looking at 1-2 roommates only is concern about how HOA and local governments will view this type of house hacking in good neighborhood.

Quote from @Jake Soper:

Where are you located, and where would you buy?

  Northern Suburbs of Dallas

As someone looking for a first time home I am avoiding anything with foundation issues. Its just not something I have any DIY experience with, and if I can choose between a property with something I know how to deal with, and one that I don't know what I am getting into, I prefer the issue I understand better.

From a business standpoint I agree that just baking in the numbers is a valid approach, but that is much easier said by someone that has hired contractors for many jobs over many years than someone who has never had property at all.

My question on the plumbing would be how old is it and what condition is it in (according to someone familiar with this specific issue).

The problem with with the plumbing issue is that a pipe burst would do damage and require repair to not just the pipe itself but likely drywall, flooring, etc. as well as possible damage to tenant property. Not sure how the insurance company would feel about this either, will it affect your rate if fixed, and if so how much?

And since this is Florida, there is a mold issue that could come from water intrusion like that which is also a problem.

Thanks for the reply Jeff!

Let me expand just a bit on the equity point, its something I have considered but did not dive into in the original question (trying to keep it somewhat concise). I am paying rent, it was ~$1000/mo but is going up to ~$1250 in a couple months. And it does bother me that I build no equity with the rent going out the window, etc.

That said, I'm also a bit concerned about how much equity can be built in the near term if I were to buy. Of that $2500 or so monthly cost for the house close to $1000 is going to taxes and insurance, and keeping in mind how amortization favors interest first I think it would be fair to say that in the first 2-3 years I am not going to build much equity. This would be fine if some appreciation was a reasonable expectation, but I think we have a decent chance at very flat appreciation given how wild the last 2 years were.

And of course that would not be especially concerning if I intended to stay longer term but I think there is a good chance I end up moving in the next 2-3 years, and I would want to convert to a full rental at that point. Of course I can keep building equity as a full rental, but with the properties I am seeing the yield on the down payment is going to be low.

Dave Meyer's numbers definitely shed some light on the 1% rule, and I think he makes a good point. However what I find even more telling than that is his top 10 markets for cash flow, most are rustbelt towns that are about the polar opposite of my area, which makes me think that what I am seeing might not be too far off the mark.

First time poster, hopefully this is the right place to ask this sort of general question.

I have been looking at buying a home and house hacking for a little over a year. Been saving for a down payment and watching the local listings carefully.

I've also been reading up on house hacking and have come to the realization that much of what I have read on the subject does not match up even remotely with what I am seeing in the real world. I'm not sure if this is because the information is based on an earlier era when this was a realistic strategy, because my area is just not suited to it, or because I am looking in the wrong places for properties.

Basically, many of the claims that I see about what to buy (the 1% rule, getting paid to live there or at least living for free) are entirely unrealistic. I have done a lot of back of envelope calculations on houses in my area (we have essentially no multi-family units, and I could not afford them anyway) and none of them are going to be close to meeting the 1% rule renting them out, or even close to break even in a house hack scenario.

What I am seeing is even with 20% down payment, mortgage+taxes+insurance runs ~$2500 monthly with rent on comparable properties being about the same, this being for a 3 bed/2 bath home. So I could rent a bedroom, perhaps for as much as $1000/mo, but that leaves me at $1500/mo to pay myself, which is more than renting (for now) and no where near break even.

Thus far I have mainly been watching Zillow, and I admit I have not done very detailed calculations, so it is possible I am missing something. But my impression is that in this market the house hacking concept is really not viable, and is definitely not close to the claims that have been made about what it can do.

Am I missing something?