All Forum Posts by: Joey Gorombey

Hi All,

As I begin my real-estate investing journey, I am primarily interested in house-hacking within Kansas City, MO. How did some of you guys find multifamily properties? Were you guys able to transform Zillow/Redfin hits into pursuits on deals, or successful deals?  It seems like that's what most people would do -- expect a couple keystrokes to yield a good deal. 

And it feels like that's what I'm doing: expecting third party results to be some kind of magic trick. My instinct is telling me I'm doing things wrong: that third party sites offer neither unique data, nor fresh data, and that I'm wasting my time browsing them. I've got a part of my brain telling me that this is the easy thing to do, and that real deals probably take a bit more digging. Am I totally incorrect? Have some of you used these third party sites to great effect? If a third party site wasn't the impetus for your first house hack, what was? Eager to hear stories! 

@Theresa Harris Thanks for the input! I'll factor that in. The tip about the worse unit is helpful also! I hadn't considered this. Thank you so much for the support! 

@Rebecca M. Thanks for the detailed and thorough answer! It was comprehensive! I'll be sure to implement your feedback: you've given me a good starting point for metrics to really look at, and reminded me that, in the long run, house hacks might turn out well, even if I have negative cash flow for a couple years (and living expenses might decrease my first year anyway). I think, for me, action is the key. As you can probably tell, I overanalyze :). A five year report with Rent, P&I, Taxes, Insurance, Vacancy, Garbage pick-up, Landscaping, Repairs, Tenant turnover costs, Cap ex, etc should keep me steady, and help me move toward a close! 

@Drew Sygit Thanks for the honest advice! I did not factor in outside rent when calculating the cash flow of the existing property, because I wanted to see how the property performed in a vaccuum, i.e. only factoring in income and expenses related to the property itself. However, your suggestion about comparing living expenses in my duplex versus other areas is useful, too! It seems like it would be wise for me to get to know the market myself, rather than relying on other people. 

What are some of the typical ways that you do that when assessing an area? Calling/emailing other landlords? Pulling historical data?

@Taylor L.,

Thanks for the response! 

It seems like you're saying to look at the property holistically, with two units rented, in order to determine whether the property itself is a good investment. Based off the numbers I have right now, it seems like this property would generate cash flow upon moving out and renting both units.

You seem like a smart man! I really appreciate the reply! If you'd indulge me, I'd like to take our little exercise one step further. I have existing connections in my area to a real-estate agent, and property management company. Other than them, who else do you think I would typically need to speak to in order to verify the numbers I have so far?  

Hi All,

TL;DR -- How do I evaluate properties that I will house hack? Should I look at the property holistically, or with only one unit of income? 

I'm interested in house hacking, and subsequently purchasing multifamily rental properties. When evaluating multifamily properties for house hacking, how does one go about underwriting the property? 

Estimating the property with two rental units versus one rental unit gives very different numbers on the property. Should I be underwriting the property with one rental unit or two? As a newbie investor, I see arguments for doing both. 

Evaluating with one unit of income (since I'd be living in the other) gives me a realistic idea of expenses, but the property doesn't seem ideal. Assuming FHA financing at 3.5% with zero points, 10% repairs and maintenance, 6% vacancy, 10% capex, 10% management fees, taxes, HOA fees, and not including PMI:

• $6000 NOI, Cap rate of 4.0%, -25% CoC return, and the 50% rule generates a measly $2 in cash flow. The property underwritten at 1 unit also fails the 1% test miserably

Evaluating at two units of income seems to tell a whole different story. Assuming everything above is constant, except rent is calculated for both units, i.e. not living there:

1. $18,000 NOI, Cap rate of 11.9%, 100% CoC return, and the 50% rule generates $756 cash flow. The property underwritten at 2 units also gives 1.6%, passing the 1% test.

It seems like this data is objectively telling me house hacking makes this property miserable, and that it's a grand slam rental property, but I feel like I'm missing something here. After all, one side of me is saying that a $400 or $500 mortgage with equity still seems better than renting. And the other side of me is sticking to the numbers, saying that I'm essentially renting cheap, but carrying the burden of being a landlord, and assuming costs that will sink my investment. 

Thoughts?

Hi All! My name is Joey Gorombey, and I found Bigger Pockets through "How to Invest in Real Estate." I've read the book, and am brand new to real estate investing. It seems like house hacking is how I want to begin my journey, and I'm interested in purchasing cash flow positive multi family properties. For my current financial situation, an FHA loan or 203k loan is probably best

Within Better Pockets, what resources have helped you overcome fear? I have found plenty of deals, but feel like I am standing at the edge of a cliff, and I’m looking to build my own process that can handle fear. What was the first thing you did after finding a potential property? Calling the agent? Running the numbers or implementing the LAPS system? How did you move forward? 

Thanks for spending the time to read my post!