All Forum Posts by: David Liu

Hi Alon, 

Congrats on being close to getting your 1st investment properties. 

I'd ask for the rent roll, or income statements. Look at the numbers, see if it cashflows, what about vacancy?  

You'll want to have the right property management company set up. Not always a good idea to just use the same vendors as the seller as there may be improvements you can achieve. i.e. property management company doesn't give guests the easiest instructions to check in, so reviews are down. 

Hi Michael, 

This is assuming that you are staying in your primary home and house hacking. I was a little confused on the way you worded your question because it seemed like you were asking how to calculate cashflow if you didn't live in your home and fully rented out your house. 

Cashflow=Rental income- expenses

Rental income: how many rooms will you be renting out? How much can you get for it? Check Facebook Marketplace or craigslist (rooms for rent). 

Expenses: 

1. Mortgage

2. Property Taxes (never heard of property taxes increasing if you convert a house into a house hack. Very weird... property taxes typically increase when there is a tax reassessment (renovations done, ADU was added, etc...) So maybe that's what people meant when they told you your property tax may go up (i.e. adding an ADU to rent out). But if you keep your house as is, then there shouldn't been a property tax hike.

3. lawn care, utilities, parking spot 

4. saving up for capex expenses (i.e. 5-8% of rental income depending on the condition of your home)

5. Repairs & Maintenance (5-8% of rental income)

Take a look at the BP rental calculator to see all the potential expenses you may have while house hacking. 

Note: if the cashflow comes out negative, you technically aren't "losing", because your tenant is at least partially covering your biggest monthly expense which is housing... 

"
Any pointers to further reduce monthly cost would be appreciated!

Also any pointers on renting for first timers would be appreciated !
"

To reduce monthly costs, you'll want to see what needs to be repaired or replaced prior to buying the property. See if the seller will give you a discount on the sale price based on those things that may break and cause your monthly cost to go up. Examples include: HVAC, the roof, etc... 

These are things that will increase your cost of ownership if not properly maintained. 

The monthly costs are unavoidable so take them as they are. What you can control is the monthly income. Some ideas would be, if there's a storage unit on the property and if not, put one in and charge a monthly fee to use it. You can also increase monthly income by doing medium term rentals for travelling nurses as an example. The rent is typically 1.5x that of long term rentals. 

Hope that gives you some ideas. Good luck

Ask them if they have licensing. 

Other red flags:

Give them a situation and ask them how they would handle it. 

I.e. if a lightbulb is dead, what would they do? Do they send a handyman that'll charge you $50 to change the lightbulb or would they ask the tenant to just change it? the latter is the better response. 

Ask them how they receive and manage rent payments, how do they track expenses for your property? If it's via excel... that's a red flag. They should have an online property management software portal for you to log into and check all the financials at any time. 

Hope this helps!

We've used craiglist "shared rooms" section and found great tenants. 

I'd say it's mostly about the qualification questions you ask and making sure you do a credit and background check. 

Some example qualification questions would be :

1. Do they work remote/hybrid? 

2. Does their sleep schedule match with yours? 

3. What are their cleaning habits? Do they like to wash dishes right away or leave it for a day? 

etc.... 

You can the answers to match what you want in a roommate. 

@Danielle, awesome to hear you got your house hack property. It sucks that people in your circle don't understand or can appreciate what a life-changing decision you made by buying an income producing property! 

So for DIY, I used to be a construction engineer(managed contractors), my wife and I also renovated our own house hack with LVP, repainting tiles, walls etc... 

I have two pieces of advice for you. One is practical and second is mental. 

On the practical side, try to look for an LVP flooring that has sound blocking properties. With 4 other roommates, the more sound proofing measures you can take the better experience it will be. So flooring, insulation etc... should have sound proofing thought out. Use HomeDepot's flooring calculator to calculate how much flooring you'll need (it includes a 5% extra flooring buffer because you will mess up some cuts)

On the mental side, whether it's a big construction project or a simple LVP flooring project, you will encounter set backs, problems etc... you're going to want to give up, take a deep breath and push on. It'll get done. 

We just completed a triplex renovation in Charlotte that took 1.5x longer than it should but we pushed through and we were able to double rents and improve the living quality. 

Let me know if you have any specific construction or house hacking questions

Hi Siyi, I second the MTR route for the ADU. Much better cashflow than LTR. 1.5X rent usually. check furnishedfinder.com for a quick idea on how much an ADU can rent for to travelling nurses in the area you are buying the ADU + House.

Congrats on own all 3 properties! 

I would recommend you start off with the single family home because it's already built and there will be less permitting involved (think sewer line is already connected to the city's pipes, assumption*). You'll learn a lot from the renovation that you can then apply to the new construction. 

I used to be a construction engineer and there are a lot of things you won't think about as a 1st time builder. So start with something that's already built and learn the basics. It's a much bigger challenge to build something from the ground up in my opionion. 

It's also less cash required vs your new builds. 

Good luck

 I really like Nicholas's answer. At the root of it, I believe you are undecided on your market because of the lack of knowledge on those markets you're looking at. So definitely go attend meetups, in fact you may not even need to go to far away meet ups, you may find investors in your local area that invest in Pennsylvania and Delaware. So take that 1st step and go to a local meetup, you never know who you'll bump into. 

I also sense some hesitation in investing out of state, because you want your next property to be a "reasonable driving distance" from you. That's understandable especially when it's your 1st out of state investment. So I recommend you read David Greene's book on Long distance real estate investing to get the step by step guide on how to get your next property. There will be advice on how to get over your fear of investing out of state, maybe the place you'll find will be a flight away, not just a drive... i.e. My wife and I live in California but invest in NC. 

Good luck Diane! 

@David Yamamoto, 

1st of congrats on thinking about house hacking. Hopefully the tenants will cover the majority of your mortgage. 

All the advice here is great. 

The only thing I would add is about the screening part. 

My wife and I house hack in the California and the 1st thing we do is have a facetime or video call with the potential tenant. If there is a good fit ( i.e sleep and work schedules align, cleaning habits etc... ) then we ask if the tenant is interested in seeing the place in person. 

That'll give you two touchpoints with the potential tenant. Once the house tour is completed, then we ask the tenant if they are interested in applying to be a tenant and send them the background/credit check application. We use Transunion for that. Transunion collects the $35-$40 fee directly from the tenant. If the credit and background check is good with you then we send a lease agreement to the tenant. 

Hope that gives some additional insights. 

David