All Forum Posts by: Hassan Karaouni

Thanks @Laura Shinkle and @Osazee Edebiri - you've helped me to see that self-managing might be more feasible than I thought (plus other learnings too). I'm currently reviewing my learnings from these posts and will likely follow up with some direct outreach to each of you. Thanks again!

Thanks for the input @Ryan Thomson and @Michael Smythe!

Thanks for that @Laura Shinkle! I really appreciate you and the community for actively sharing on these forums. Hopefully your time on these posts can help future people on their journeys too.

Live In: why do I want to Live In but still seek a property manager?

- Delegation: I'd like to delegate as much of the property management as possible so that I can focus my time on any property value-adds and ultimately keep focusing my time outside of the property (career, family, etc). 

- Assumed Benefits: I assume the benefits of the property manager would be that they coordinate repairs, drive tenant screening, find tenants, follow up to get rents, etc. I'm assuming those end up taking a significant amount of time that I'd rather delegate to a professional focused on those.

- Ideal Outcome: I'd be welcoming to tenants, but we wouldn't be day-to-day friends. I might especially help on final tenant screening such as a quick call to check-in with the tenant but that's probably it.

Thank you all!

- @Ryan Thomson: I appreciate you sharing your breakdown and I have two questions. Vacancy Rate: what's your process like for filling vacancies and do you find that 5% is an accurate reserve rate? I feel like 5-10% is low, but I've never tried to fill a vacancy before so I really don't know. Maintenance and CapEx Budget: do you have a strong opinion that these should be reserved separately? In my calculation, I just put one lump sum of 10%.

- @Laura Shinkle: I'm trying to learn more about property management options, so I appreciate your deep dive there. Live In: can you share why property managers might be reluctant to manage tenants in a home that I live in too? I would plan to live in the home. Rent Style: I'm not sure on renting by room vs unit, long vs short, etc but I'm generally thinking that I will rent by room, prioritize medium- and long-term rentals (except for sometimes Airbnb'ing my own space if I'm not there), and fully furnish the space.

Hello everyone, my name is Hassan and I'm defining investment strategies to House Hack in Oakland. I'd appreciate if anyone can provide input on variables I'm using below. What adjustments, if any, should I make? If it helps to have more concrete details, we could consider a 700K-1M purchase that I occupy with 4-5 rooms that I rent. All feedback is welcome and hopefully this helps others too!

Variables

- Interest Rates: 7%. If I'm calculating correctly, this really hurts for investment potential but I'm hopeful that sometime in the next 3-5 years I can get to 5%.

- Vacancy Rates: 8%. I started with 5% but bumped up to account for having 4-5 rooms.

- Annual Rent Increase: 3%. I'm really not confident on this estimate since I've seen some recent updates that CPI also factors in (might reduce rent increases) but there also might be ways to increase rent by up to 10% with 60-days notice.

- Annual Expenses Increase: 3%. I considered that 4% or 5% might be better due to high inflation, but I'm not sure how you all think about this.

- Annual Appreciation: 4%. I'm not sure what to input here.

- Property Taxes: 1.4%. I believe there is also a 2% cap on increased cost per year because of Prop 13. My understanding is that Property Tax is reassessed each year to be 1.4% of the home's newly assessed value that year but also the net annual cost increase is capped at 2%.

- Property Management Fees: 10% of Rent Revenue. Is there any way to get a better rate here? I think I've heard of 8% in the past.

- Expenditures: 10% of Rent Revenue

- Insurance: $1,500 Annual. I'm not sure here and saw a lot of different estimates online from 1-2.5K.

- Utilities: $600 Monthly. I thought $300-400 might be more standard, but $600 could help to account for multiple renters.

- Closing Costs: 3.5%. I was not sure how to best calculate this. I've also read that Transfer Tax is covered by sellers, so I'm not including that in my costs.

My name is Hassan and I'm seeking to build a team for a multi-family house hack and/or flip in Oakland.

My Ask
- If you're an agent, lender, contractor, or manager and you're interested in working together, please message me.
- If you have recommendations, please share them as a comment. I'm sure others in the forum would appreciate that too.

My Context
- My Why: I want to build up a passive investment portfolio. I'm paying high rents and I believe transitioning to home ownership could be a better long-term play. The Bay Area is a good fit for me because it's my lifetime "headquarters" and I love it here. I plan to travel globally on a regular basis, but I went to Stanford, I work on AR/VR in the Bay Area, and my family operates a meat farm in Vacaville. I love the energy of the tech and outdoor communities here.

- My Who: I am working independently right now but I'm eager to build a team of an agent, lender, property manager,and contractor familiar with house hacking and flipping in Oakland.

- My What: I'm interested in equity and cash flow, so I'm prioritizing multi family homes. Positive cash flow would be ideal, but some negative cash flow would be acceptable if needed. I certainly want to beat my current rental rate. Pre-approvals should not be an issue but I am looking to renew a previous pre-approval and I would welcome recommendations to lenders focused on the Bay Area.

- My Where: I prefer Oakland because of the community, proximity to my tech work in the Bay Area, and proximity to my family's farm work in the North Bay Area. I am currently renting an apartment in Oakland.

- My When: I'd like to close on a home as soon as possible, ideally within Winter 2022.

- My How: I'm ready to be flexible on my personal living situation. I prefer to live minimally and a small, studio-sized space with internet and basic amenities (electricity, water, etc) would be great for me. For example, I'd welcome converting a large garage or extra structure into my living space and renting the rest. I don't mind if significant work is needed if the long-term investment is sound.

Hi Aaron - I'm looking too and following your message! I'll send you a connection request in case you want to share learnings as we go.

Following - Also Interested

I've enjoyed learning about general REI and specifically house hacking on BiggerPockets, but I'm also very interested in ADUs. My family owns an all-natural meat farm in Vacaville, CA and I'd like to see if I can set up an ADU to help my family to secure passive income.

• - Does anyone know the typical price range of an ADU in the CA North Bay Area? Do ADU price ranges vary significantly across different regions and states?
• - Beyond the purchase cost, what are other financial considerations for an ADU?
• - How do loans for ADUs compare to loans for purchasing a primary home?
• - Are there resources you would recommend for learning about ADUs specifically? BiggerPockets webinars and books are helping me learn about house hacking, but I have yet to find resources dedicated to ADUs.

Per the post description, can anyone share how your ~1% rule house hack has performed over 5-10 years? 10-20 years? More? Or, if you haven't been house hacking for over 5 years, please share that too.

I'm particularly interested in knowing if financial components such as cash flow, property tax, etc have remained stable. I'm new to BiggerPockets and I'm interested in learning more about theory and practice in REI, so thanks in advance for any tips!

Motivation and Context

- I'm generally interested in analyzing the short- and long-term on any investment. It seems many house hacks also get flipped in 2-4 years, so I haven't seen much discussion of long-term outcomes if you commit to a specific property.

- There are many driving forces in extensively developed areas like San Francisco that make the 1% rule challenging, but what historically happens next for the areas in which the 1% rule is attainable? What does that mean for investors? For example, there are some markets where I could purchase a 100K property and rent the property for over 1K, but what happens to financial components over time in those markets? 

- My guesses: the 1% status of a market and positive cash flow on a property in that market generally stay stable for ~5 years. If the area starts to rapidly develop, then investors will experience positive appreciation but need to be mindful of rent control, property tax changes, etc. Positive cash flow potential might be reduced if interest in the property declines over time or newer and cheaper options become available.