All Forum Posts by: Jack Plantin

Is there something I'm missing? There are already 2 tenants in place paying $1150 per month: https://www.biggerpockets.com/...

Anything give you pause from making a deal like this? Thanks! 

I have gotten units with 1 egress legalized in chicago, twice actually. By just grandfathering them in with a water bill pulled off FOIA. There also are a lot of 50's and 60's build multiunits in chicago with 1 egress. 

Pull a FOIA water bill from 1950 and if it says 3 units, etc. you send uynto city and they send back a "corrected zoning doc". The city does not even visit property. 

@Jack Plantin - 1. Maybe keep looking for a better deal that’ll cash flow better. There will be distressed sellers and off market deals if you send direct mail.

2. It's FHA so you're living there for at least the next year. If you live in the basement and rent out the first floor that's ok. You need a direct egress - window or stairs to outside and also a one into the main house. You could also live in the first floor unit and have a basement "roommate" who has backup egress access through your house but stays 100% in his or her space. (Door can't be deadbolted on both sides).

3. I have been quoted 3-6k to turn a basement half window into an egress window with drainage so it doesn’t leak, so don’t underestimate these costs. Also zoning may prevent you from installing a stove or anything above a kitchenette / wet bar type setup.

Hi Jack, I've been house hacking for several years and can offer some insight. See my thoughts in bold below.

1. There is a normal washer and dryer in the basement, should I allow tenants to use this for free if I'm paying the water bill? Or should I sell them for coin op machines? Or charge them $50 a month to use?

I factored utilities into their monthly rent and then advertised it as an all inclusive price but I don't think it would hurt if you tried pricing as planned and adding "+ $50/month for utilities" in the posting. Worst case scenario you change it back after a few days or a week of no success. 

2. Does it make sense to take out HML or friend/family loan to finish the basement for 20k to get $800-1000 rental income per month? Same with the attic. Or should I do it myself slowly over the next year?

Assuming your numbers are accurate, if you're able to get another (on the low end of your estimate) $800/month immediately after doing a $20k renovation those numbers make sense. This is of course if you're able to rent out the unit quickly and actually receive the rents you say. Your financial situation is important here too, if you don't have any liquid reserves I'd hesitate on taking on more leverage. 

3. Attic and basement have only 1 entrance/exit, so would never be legal units. Is it too risky to put tenants in there?

I rent my basement which is the same but you have to make your own decision here. 

4. What software (if any) should I use to run credit/background checks when finding tenants?

Zillow makes this extremely easy. 

5. Any general advice for beginning househackers?

Screen your tenants thoroughly. Finding good deals is commonly discussed as the key to successful investing (and it's a huge part of it) but managing your assets efficiently is just as important. You already mentioned the background/credit check but make sure you also call their last two landlords, call their employer and conduct move in/move out reports that they physically sign. Finding trustworthy, responsible tenants makes this business much easier. Don't cut corners on the vetting process!

I don't ever recommend "illegal" rentals. If the attic and basement don't meet the requirements for living space and/or rental space, don't do it.

Hi Jack,

A couple of things to consider. 

I would assume the value this partnership brings to the table has to do with the rehab of the project. With only 12k in repairs estimated I can't imagine this is a large rehab. Paint, carpet, updating appliances, and a handful of actual repairs will eat up 12k in a minute. Consider the scope of the work and each trade involved. Certain things go beyond a weekend warrior flippers skill set and require an experienced sometimes licensed professional. Painting is something anyone can do and if you take your time, watch some re-runs of this old house, and buy the proper supplies I doubt you will need any help. 

Now I quite like how this partnership was presented. In this situation you presented, you're splitting the balance of the mortgage when the  house is sold making his investment 46k and yours only 25k. This is appropriate for a 2/3 split of the profit. 

I would consider passing on the HML or the HELOC. If this is going to appraise for $125k you could simply refinance the home with a conventional loan. Paying him 61k and paying off the 20k remaining balance of the mortgage puts you around 65% LTV. This allows you to duck the realtor's fees and capital gains tax and should put you at a fantastic rate.