All Forum Posts by: Roger Simons

The only reason anyone would want to live in NYC and pay the astronomical accommodation prices there is because you're making a ton of money there.  But 50k is not a ton of money so this doesn't make sense.  I'm guessing you live there for other reasons.  You should travel and then you'll see how awful it is.  Can you work online?  Can you work elsewhere and make a similar amount of money but pay a fraction of NYC prices?  Condo fees are substantial and are usually 1-3% asset value which hugely hurts your money picture.  Sure you don't have to do maintenance but maintenance is simply not that much in a house, hence their popularity.  Condos are for old people that are dying and don't want the maintenance worries.  

House hacking is simple: You need to rent out the vast majority of your space and occupy only a small percentage.  You'll never get good advice from real estate professionals who think aggressive house hacking is renting out one side of a duplex.  Wow, how creative.  I can't believe the comments on here.  Look at my other posts to see how far you can go with this concept of maximizing rental  income.  You have to convert all space that could be rented to rentals. So you won't have a living room, dining room, etc.  They'll be rentals.  So most of your space is rented.  A lot of people live free this way as long as rental demand is high in their area so they can fill a vacancy in a few days instead of a few weeks or months.  You can do the same with commercial space.  

Buy the biggest lot you can find.
Build the biggest footprint you are allowed.  Forget parking.  Parking is not your friend and just announces to the neighborhood every person coming and going.  Try to rent to people without vehicles.  
Build the most square footage you can in that footprint (deepest and tallest).  Forget having a yard.  
Build small rooms because they pay more.  Soundproof them well to give renters privacy and freedom when on the phone.
And do this without contravening any zoning laws.  

A mortgage payoff in 5 years at these interest rates is indeed possible.  Do it again after refinancing that property and buying a few others and you'll have about 20k/month at today's money pouring in.  Retire in splendor.  10 years of sacrifice of space is all it takes.  If young people understood these concepts it would revolutionize rentals because a lot more units would come on the market offering way more selection (yes at a reduced price after a while but it wouldn't be much because people are lazy and stubborn and wouldn't embrace this much) and they could be financially free, really free, in just a decade.  All they need is a small down payment to get started.  

Personally I feel it makes more sense to build because houses are just not designed for this very well.  Parents want to know everything about their children so they don't want soundproofing. They love open concept but we hate it because it wastes so much space.  Rooms need to be a set size for rentals; smaller rooms always rent for more money per sq ft (99% of the time with moderate rentals).  No space can be wasted.  Better to build from scratch or buy a wreck that is cheap and rebuild it the way you want.  

Realize that a lot of this hinges on the basement.  You just have to have a basement.  Fortunately many houses come with an unfinished basement as an afterthought and the sellers are clueless as to the value lying there.  Often you can put in 6 units in a basement.  That is huge!  All you need is a 7' or higher ceiling.  Unfortunately underpinning or lowering the basement floor is one major operation and very expensive.  Just buy a house with a compatible basement.  Of course if you're building....you get things right from the start.  I think the payoff would be worth it.  Plus then it's new and lasts trouble free for decades.  That's satisfying just on it's own.  So many houses are maintained with the lowest imaginable standards then renovated to hide the lousy work.  

One challenge when building small units is bringing in natural light as they tend to be long and narrow.  

For managing space the loft bed/desk is crucial.  Otherwise the bed just takes up way too much space.  Most are designed for children but this page shows a lot of different designs. duckduckgo.com/?t=ffab&q=loft+bed+desk&iax=images&ia=images  Keep in mind most of these are displayed in rooms with ceilings way higher than 8'.  You can make this work with an 8' ceiling; you just won't be using a thick mattress.  Being able to put the bed on a pulley system to raise it to the ceiling during the day would be possible of course.  

Quote from @Chris Davidson:

@Roger Simons Look outside the numbers. While REI is a lot of numbers it also includes real people who make really irrational/rational decisions. While optimizing space and packing people in house might make financial sense, it goes against societal norms. You would expect higher vacancy, repairs, and management cost. While you might find someone who would stay there, it might not be the tenant you want.

While people hate how much things cost, I feel most people aren't ready to up end their lives and go back to dorm/ communal living. There is likely a market for it but not on as large of a scale as traditional multi family.

This is definitely a live in situation.  The more people get packed in the more carefully it needs to be managed and bad people extricated as fast as possible.  The owner has to be there.  It would work for a young single guy, a people person who is good at smoothing things over and calming people down.  If he was larger than average that would help in psychologically determining authority.   Every little bit helps.  Now the owner can take up as much space as they need of course.  They could also live in a large trailer or shipping container on the property if zoning allows it.  But I'd prefer to be in the house so I can hear when things escalate so I can defuse them as soon as possible.  In a large situation 2 kitchens might be utilized and this would be invaluable for people trying to avoid someone else.  They could agree to use separate kitchens for a while allowing things to calm down.  

I've seen some very clever micro kitchen setups from China, Japan and Korea recently as they try to make do in smaller living quarters. We would be wise to emulate that if zoning allows it.  The less people mix the less chance of tensions arising.  

Another options is to encourage the use of the outdoor space.  Wouldn't someone rather work on their computer outside in a yard than in a tiny room?  Yet I never hear of this either.  

You don't mention air.  Where is fresh air coming in?  Is there a window?  Doesn't sound like it.  If not does it have air circulation through the house's air ducting system? 

Another problem may be noise from the kitchen.  Kitchen's are surprising noisy with dishes and pots clanking and clamoring, cutlery being dropped, machines being used.  Plus people talk in the kitchen.  You could soundproof the door though which would be wise.  Tenants that don't sleep well won't feel good there.  You don't want that.  Consider a loft bed where its situated on top of a desk to save space. 

What about a fire exit?  If you don't live there that is way more dangerous.  You do NOT want to risk someone dying for any amount of money.  There must be 2 exits out of any room. 

Want to maximize your income? Figure out the optimum room size for your area. Its probably about 80 sq ft but every area is a little different with a different demographic. Once you have that focus on chopping up your space to those size of rooms. Think of how much money most house hackers get out of a smaller, say 2000 sq ft place with an unused basement. It's pathetic, often 2 bedrooms at $500 and the living room at $600 because its a little bigger and nicer. They could do so much better if they redid the layout. Even at 100 sq ft each one should be able to squeeze out 8 rooms at least and still have a 2 toilets, 1 bathroom and an ample kitchen for everyone. 8 x $500 or so is mighty great for such an investment in an area with relatively low land costs (say $150,000 - $200,000). Now you're getting 2-3% a month return. That is something almost nobody outside of STR's gets with a fraction of th work involved. Converting to STR's will double or triple your income in some areas.

Hallways and stairways waste space so really try to minimize them.  Find out about egress laws for basement units.  A private entrance will add 10-20% to your rent.  Plumb it and add about 20% more.  Ideally each would have a tiny kitchen that is modular and customizable for their needs so that big kitchen mentioned above could be eliminated and 2 more units added.  People like privacy so a RV type toilet that can be emptied could be used in each suite. 

Obviously this is for single people only!

Quote from @John Morgan:

Quote from @Roger Simons:

Quote from @John Morgan:

@Jonathan Feliciano

I did this 4 years ago and cost me 8k to convert a 1 car garage into a bedroom and full bathroom. I get an extra $200/month for it in rent. So after about 4 years or less I made up for the cost. I’d say go for it. And I’ve bought 3 properties that had them already converted into an extra bedroom. I’d rather have more bedrooms and the demand is much higher for more rooms obviously.

What were you renting the garage for (for parking a car I assume)?
What are you getting for the renovated room and bathroom?
Because in most cities the difference between the two would be a lot more than $200.  So I'm curious.  

 I was renting the house for $600/month before the rehab. I was about to list the house for $1200/month as a 3 bedroom with a one car garage. But decided to convert the one car garage into a bedroom with full bathroom. Then I asked $1400/month since I converted it to a 4 bedroom. An extra $200/month goes a long way for me. It’s now rented for $1500/month and market rent is probably $1700. Converting the garage gave me a much bigger pool of good long term tenants to choose from. I bet this family stays there for many years. Affordable 4 bedrooms like this aren’t easy to find near me in Ft Worth. 

I cannot understand your thinking doing that.  This is all wrong.  First of all you convert the living room, dining room, etc to bedrooms in the house.  The only shared area should be the kitchen and bathroom(s).  So your 3 bedroom becomes 4, 5 or 6 bedrooms.  Does it have a basement?  This should be chopped into small rooms as well.  But the garage should be so obvious!  This should be self contained, rented out separately.  $200?  How about $1000?  Or $700 if you're in a lousier area.  

As a lawyer surely you find your work well paid and also exhausting.  I'm curious why you are doing this.  Or are you going to go the safer route for minimal time expenditure like buying a multiplex and renting out 2 out of 3 units? (Not even close to maximizing your revenue but that's what most people do.  Your situation is very different from most.  Others don't have ample income. I realize you're starting out so it may be a while before the lucrative legal projects appear but if you enjoy your field they will because you will get very good at it.  I ask you why you want to get into this because most people get into real estate for the wrong reasons, just the financial angle.  That's a terrible reason to do anything.  Real estate is not something you can do "lightly" and do it well.  If its managed for you they won't care because its not their money.  Not to mention their ludicrous fees.  Most people that have been in school as long a you have develop high standards for themselves and others.  It can be aggravating dealing with complacency!  Another aspect of this is parasitical family members who are suddenly "close to you" and need accommodation because of some unexpected and horrible and unfair emergency.  Good luck trying to evict family.  Never ever rent to family or friends!  Be a good landlord though and you will meet many quality friends.  
I'd be curious how you could use your law background in real estate.  How they could be more intertwined and supplement each other.  At the very least you'll always know where you stand in any given situation, something few investors are secure about.  

Another area where people don't commit themselves is the basement which can be a gold mine though this usually involves a lot of work.  That's OK.  That's what laborers are for!  They just need to be managed well by you.  All you need is enough height.  Then add your egress access, as much as your local zoning will allow.  A private entrance is something people are happy to pay more for.  Its almost always worth the reno costs.  Taking this to the max would involve no stairways (because they waste space) and every room having a private entrance on each level with one kitchen and bathroom per level.

The ultimate house hack maximizes the space.  In my area rents are about $500 for a 100 sq ft room.  The problem is a typical house only has 3 bedrooms and its probably 2000 sq ft.  That's pretty ridiculous....$1500 for something that would probably cost $250,000?  That mortgage is going to take forever to pay off.  So let's visualize the space is used mainly for the bedrooms.  One kitchen that all the bedrooms link to is in the center minimizing hallways.  Say the interior walls are about 6" thick.  So every room takes up 6" in wall space because they share one wall except for the end ones.  Natural light is for the bedrooms, not the kitchen.  The bathroom is beside the kitchen keeping the plumbing together.  Now thinking like this, imagine how many 100 sq ft bedrooms one can now fit in 2000 sq ft.  Also some may have a private entrance to give more flexibility indoors.  Doors waste a lot of space after all.  Maybe 10 bedrooms now?  So the rent went from $1500 to $5000.  Not bad.  

Since most people buying real estate are utterly clueless when it comes to revenue you can't assume you're going to find good space utilization in almost any layout today with their spacious livin, dining and rec rooms, often open concept which is the nail in the coffin when it comes to maximizing space.  You want smallish, well soundproofed rooms so your tenants aren't disturbed by others.  So they feel peaceful and quiet at home, like they should.  So they can talk loudly on the phone without being heard, so they aren't hampered by privacy concerns.  The only way to get this at a reasonable price (nobody sane builds from scratch these days) is to get a damaged property really cheap and use that discount to renovate it to maximize revenue for house hacking.  And this is done quite often actually.  We often don't hear about it because wrecks don't tend to get advertised much.  They are quietly sold and usually to a developer who is going to mindlessly transform it into one more single family occupancy to clutter our landscape even further with wasted space.  What I'm proposing would dramatically increase the number of units available in the area if adapted on a large scale.  It could transform rental challenges today which so many people are complaining about and rightly so.  

What I'd like to find are websites that focus on space utilization in house hacking.  I have never heard anyone discuss it with any amount of depth.  Nothing comes close to this level of revenue and it can be utilized for short term renting which can result in 50-100% more income than monthly rentals if the location cooperates.

Quote from @Tracy Ross:

Quote from @Roger Simons:

Quote from @Tracy Ross:

I just did a second home as an investment AirBnB. You can check it out on my profile. I was running number on it forever and getting stuck in analysis paralysis when I just decided to close my eyes and jump. 

Per my numbers I figured it would break even every month but would be a great long term investment and also something I could enjoy when I wanted to go to the coast. That property is cash flowing anywhere between $500-$2000/month! And that is after I pay property management 22%. PM is worth every penny to me though as they take care of every detail and I just cash checks. 

I'm sure the market in Oregon is different from that in the Carolina's but I have thoroughly enjoyed watching this property get full bookings and grow in popularity. I hope you go for it!

The problem with property management is they don't care how much repairs cost.  They won't shop around like you would because its simply not their money.  They don't care.  Well....they certainly don't care nearly as much as you do.  I can see it being useful when people first start and are maybe unfamiliar with things though I'd question anyone investing in an area they are not familiar with.  It seems a lot of people are doing this that really shouldn't be.  They aren't people persons, they don't do any repairs themselves, they don't understand construction, and they don't assemble a low cost, local team they can rely on to help them when needed.  They're doing it like they would buy a mutual fund.  As if real estate is passive.  Well I guess it can be if you're lazy and detached from your investment.  But that is surely a road to ruin.  Investing in what you are interested in is key.  We shouldn't let money sway us too much.  Sure we need a profit but if the area you invest in doesn't interest you it will always grate at you when you need to spend time at it.

 Hi Roger,

I really think this is PM dependent. Our PM is on site at our condo-hotel and they are very involved in keeping the property held at a meticulous standard. There are a lot of small maintenance items (like a door jam, toilet clog, blind malfunctioning, fireplace pilot light out) that I don't have the resources to cover at the moment they occur. They are minimal in cost for me because our PM has onsite maintenance and it would end up costing me a lot more in time and labor to hire a handyman for every small inconvenience. And that's if I can find one in the small town of Lincoln City to come out and do the work. 

I guess it's a cost benefit analysis. My tenants are always happy that things are taken care of quickly and it makes them want to continue returning. All properties are going to have maintenance issues. I would say determine what you want to spend your time on. If you're looking to scale in this world you will pay people to get your time back for more worthy pursuits. 

Tracy, you are running a business without proper preparation.  You need to be prepared with your own people when things go wrong.  What you're describing is the simplest of maintenance.  It also sounds like you are not close to your investment.  Another mistake.  Its great your tenants are returning.  But you're undoubtedly spending way too much on expenses.  It also sounds like you lucked out for a management company.  Most are nowhere near as conscientious!  I just don't want inexperienced people on here making the same mistakes.  Because its really easy to give all your profits to maintenance and reno people.  VERY easy.  

And there are so many scummy slimeballs everywhere selling their "courses" that don't take the real world into account because of their lack of experience or just plain fraudulent morality where they know anything sells if its hyped enough.  95% of the "courses" are rubbish and are just regurgitated material than anyone with a bit of reading or experience knows already.  Now the pro help people really need is usually with their taxes and that is seldom purchased.  A shame because its usually a lot less than repair costs.  

Quote from @John Morgan:

@Jonathan Feliciano

I did this 4 years ago and cost me 8k to convert a 1 car garage into a bedroom and full bathroom. I get an extra $200/month for it in rent. So after about 4 years or less I made up for the cost. I’d say go for it. And I’ve bought 3 properties that had them already converted into an extra bedroom. I’d rather have more bedrooms and the demand is much higher for more rooms obviously.

What were you renting the garage for (for parking a car I assume)?
What are you getting for the renovated room and bathroom?
Because in most cities the difference between the two would be a lot more than $200.  So I'm curious.  

Looks like I can't delete a post on this forum.