All Forum Posts by: Eric Yu

Investment Info:

Single-family residence other investment.

Cash invested: $389,000

Hi y'all! First successful DADU. Bought the main house back in November 2022. Rehabbed that & then built our DADU in the backyard. Total timeline was from May 2023 until November 2023 for construction. All said, this was our most successful real estate investment/project to date.

2nd one coming up soon :)

What made you interested in investing in this type of deal?

Opportunity to create massive amounts of equity.

How did you find this deal and how did you negotiate it?

Found it on the MLS & had to go $50k over list to get it.

How did you finance this deal?

Hard money to buy the main house, then HELOC to fund construction of DADU. In the end, paid off the HELOC with cash to own it free and clear.

How did you add value to the deal?

Rehab + construction.

What was the outcome?

FINAL NUMBERS:
- Projected Costs: $380k ($357k in build cost & $23k in soft costs)
- Actual Costs: $389k ($369k in build cost $20k in soft costs)

Note: We had very minimal carrying costs because we utilized a CA HELOC with Premier Valley Bank that had a 2.99% introductory interest rate.

- Projected Finished Value: $750k
- Actual Finish Value: I think between $800-$850k, not sure yet. Waiting to get a HELOC on this once I can!

Lessons learned? Challenges?

Lots of moving parts / learning to work with the city with new construction. Having gone through the process once, it's very clear how to keep growing for the next one :)

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with myself heh. @helloericyu.

Quote from @Michael Haas:

Thanks Ryan for the Reccomendation and welcome to Seattle Ryan K! I’m excited to get to know you and your girlfriend. As others have reccomended meetups are a great way to network- search “HouseHack Seattle Happy Hour” on meetup.com to find our monthly happy hour. We have food, drinks, networking, and a speaker and have had as many as 100 real estate investors and future investors in attendance. 

As always, reach out to me anytime! HouseHacking is in our blood and has been hugely profitably for my family’s financial life. I’m a true believer and always willing to answer questions and spread the gospel of HouseHacking 😆

 @Michael Haas is the king of the house hack. I joined his team because of it :P 

Ayooo! September meetup coming at you! Speaker of the month: TBD. Super excited for the speaker to come and share his story about real estate investing. I helped him acquire his first Short Term Rental in 2022, and he's been KILLING it out there.

There will be free food and free drinks! Perfect place to network with new real estate investors, house hackers, and folks who are breaking into the short term rental space!

Agenda for the evening:

5:30-6:30 PM: Grab some food & mingle

6:30-7:15 PM: Guest Speaker: TBD

7:15-8:30 PM: Eating, drinking, and networking! And remember, don't forget to follow up after you go home!

You don't need to have any experience with house hacking or real estate investing to come. You can simply just come to have a good time and learn from others. We hope to see you there!

Quote from @Oscar Ledezma Vazquez:

Hi,

My wife and I both have a W2 job and purchased a vacation home in big bear, CA in late 2022 that is being used as a short term rental. I am looking for a CPA that knows the STR Loophole and can help us with offsetting our W2 income and is taking new clients. The CPA I been using isn't versed in real estate and isn't aware of the STR loophole.

i also wanted to consult with a CPA, If it's worth doing a cost segregation for our situation and what are the tax implications.

Thanks!

Hi Oscar!

There's definitely tradeoffs you'll want to consider & discuss with a CPA about. I've done it a number of times now, and it's been a nice tax break. The guy I work with is based out of California, Tony Hoong. He's the CPA Dude. Has been great & really knowledgeable. 

Cheers!

Hi y'all!

I had a better year than expected in RE sales, so I'm looking to minimize my tax bill by buying a small multi-family property. I've primarily invested in CA / WA so far, but I'm open to exploring other areas (midwest) as well. For this one, I'll be optimizing for a cash-flow play. 

Ideal criteria:

1) Cash flow neutral @ 20% down 8% interest rates as a long term rental

2) Has option to convert units into short or mid-term rentals to juice up cash flows if I want. 

3) Within 1.5 hours driving distance to a larger metro area. 

Open to a project that requires some rehab (mostly cosmetic, kitchens, floor, paint, bathrooms, etc.) 

Any suggestions for cities/places to start digging around?

Quote from @Julien Jeannot:

@Benjamin Carver

In my own back yard. North end of the Seattle market.

 Niiiice - that's exactly what I'm doing here too :) Having land to build on in Seattle is the way to play these days. 

Quote from @Marcela Hoag:

I am an investor and real estate agent and I've just secured a fantastic deal (duplex) for one of my clients, featuring an impressive 8+% cap rate with reliable tenants already in place, no repairs needed.  Now, I want to hear from you seasoned investors out there – what are your thoughts on an 8%+ cap rate? Is this the kind of investment opportunity that gets your attention? Drop your insights and opinions below – let's start a conversation about what makes a great real estate investment in this market! 💼📈

Looking forward to hearing from all you savvy investors and/or new investors that want to learn more about opportunities like that! 

Depends on the area for sure. 8-cap in Seattle area is fantastic, especially if it's a multi-family type property. I'd be interested in 8-cap deals out in Seattle & I know plenty of investors who would be interested as well :) 

Quote from @Ryan Thomson:

Hey @Hansel Gunawan one of the best house hacking agents in town is "house hack seattle". Check out @Michael Haas

 +1 to Michael & team!

Optimizing for a cash flow goal will be difficult in the nearby Seattle areas. I'd say if you care a lot about cash flow, you might want to venture down to the Tacoma area or up to Everett. Seattle is much more of an appreciation market, so a lot of my investors buy with the expectation that they'll lose money monthly (well... true for the most part. My cash buyers will always cash flow :P). 

Happy to help if you want to chat more!

Quote from @Julien Jeannot:

Quote from @Michael Smythies:

Quote from @Julien Jeannot:

@Christina Greaves

1) Multi families 2-4 & 5+ commercial

2) The north end of Seattle. Lots of things will be helpful to investors:

-  Population growth will not be supported by the city's growth plans. WA state's recent actions to force cities to build middle housing will help, but not enough.

 - Everett: designated as the Navy's future homeport for the next generation of 12 guided missile frigates. First ship scheduled to show in 2026. 428 navy personal per ship, plus support staff and families

- A great deal of lots will benefit from the new WA middle housing laws. Think ADU & DADUs.

-  Future development in the port of Everett: 60k sqft retail and 200k sft commercial

- Lynnwood's growth plans is rather restrictive for high density multi family growth

- Massive investments in Maltby, Cathcart, Arlington & Maryville's signaling developer's confidence in lack of housing and growth opportunities. These projects will take years to complete and not likely to address demand.

- Jobs are moving North, for example, Tesla signed a lease for 245k sqft warehouse in Marysville. 

3) I avoid King County and will not invest in Seattle. 

4) Depends what you want to look at and for what strategy. Far too many tools out there. Forecast data is hard to come by and very much city by city. The good stuff, however you have to dig up in news stories, public announcements, investor meet up and notes from the cities/counties meetings.

 Hi Julien, 

I am curious to hear why is it that you avoid King County and specifically the Seattle area? Curious to hear your thoughts on this one. Thanks! 

 Regulation risk and unfriendly landlord environment. 

This can be mitigated, but I choose to derisk that part of my business and there are plenty of other great markets. Prices points are also better.

To add, there's still good options when it comes to development if you're not planning on building to hold. Lots of great AADU/DADU options if you're trying to exit upon completion. 

@Christina Greaves, I'm doing some LTR, MTR, STR, and development. There's pros/cons to every investing strategy, so you'll want to define clear goals for yourself. On my end, I started off by building up enough cash flow to feel comfortable to quit my job. Since then, I've continued to grow my STR portfolio while simultaneously starting to venture into development (where you can multiply your capital more quickly).

I tell people all the time that you want to have a mix of wealth-generating (buy and holds) & capital-generating (flips, W2, development) investments so that you can keep growing. 

Welp, I guess my post got removed for advertising, but here it is again. 

Aside from finding a property in the $300-$650k price point, do you have any projected returns you're hoping to achieve? That would narrow down the search a lot. Truthfully, you'll want to either look more south or more north to find options that would work in that price point. Here are my thoughts about the various options:

Option 1: SFH w/ ADU/DADU Ideally, you'll be the one to build the DADU to benefit from equity gains (I'm currently doing a project like this, so you're welcome to come tour it sometime). If you're buying a property with an existing DADU, you'll be paying a premium. With something like a basement ADU, this is definitely do-able, but to your point, you'll be mostly looking at places far away from where you'll need to commute to. I personally think this is your best option (or finding a split level home without an official ADU and renting out rooms).

Option 2: Purchase a Townhome (2+ bed) & Lease Rooms: Something I don't think is talked about enough is tradeoff of sharing space. I would add that as a con for room rentals (unless you already have friends you would rent to). Also, appreciation is less of a pro compared to a single family home.

Option 3: Small Studio & Airbnb while traveling

With this option, you won't be saving too much with the house hack & you'll be offering up your personal space as well.

Alternatively, mind if I propose:

Option 4: Keep renting & buy a pure investment property (Airbnb)

I did a combined house hack / Airbnb, but with interest rates where they're at, you might not even save that much with a house hack, so you may be better off just optimizing for a pure investment property instead. Factoring in benefits of cost segregations/bonus depreciation to write off against your W2 income & you'll be saving/earning a lot more than you would with a house hack. Note: I'm not a CPA and there are nuances you need to understand with this strategy.