All Forum Posts by: Nick Scannell

@Nick Scannell having a separate account is a non-issue really. I mean, "A lot of transfers" is open to interpretation - "a lot" to you may not be "a lot" to me. But you are only collecting rent 12 times every year. It's not going to be that complicated. When I owned 1 property that I house hacked, I had 1 bank account. Now, once you move out...then it's different. But for now, I would say it's totally up to your preference. And I know....hey, I just got started, I don't know what my preference is! And that's why I'm saying to keep it as one account for now. And then if it's easy to monitor then you aren't paying $10 per month on another account. Try it with one account for now. That's my recommendation.

Thank you for the perspective, Andrew! I agree that the single property isn't too much of a hassle. I went ahead and set up a separate account and auto direct deposit for my part of the PITI. Have a great week!

1 Vote

Quote from @Ryan Thomson:

@Nick Scannell when I got my first property I set up a separate bank account and got a new credit card only for home expenses. This allowed me to keep things really clean for accounting purposes and tax purposes. I liked that system.

For the mortgage payment, you can nail down a number that you need to put into that account each month in order to cover mortgage payments. Then set up automated transfers from your personal account into your house account for that amount.

Do something similar for an "expense account".

And when there are large expenses you may need to do a manual one-off transfer to cover it (if you pay with your house credit card that is being paid from the house account).

Thank you, Ryan! Auto direct deposit is fairly through my employer, so I'll go ahead and do that! I agree it will be much easier to see where things are going.

Credit card was another thing on my mind. I've heard of folks using travel cards for points with all of the rehab costs. Is there a specific card you chose to use?

1 Vote

TL/DR - I bought a 3.5 down FHA Duplex, I'll be living in one side and renting out the other. I still need to pay towards the mortgage, but I'm saving money compared to renting.

Do folks recommend:

1. Just deposit rent and pay mortgage from existing account, use existing personal finance info and keep organized receipts for tax season.

Pro - Less transfers and transactions

Con - Harder during tax season

2. Separate rental to a different bank account right away and separately direct deposit my portion of mortgage + reserves each month. Run all maintenance + rehab costs through this account.

Pro - Completely separate for tax season/monitoring finances

Con - Lots of personal transfers and transactions since I'm still paying towards mortgage/costs/rehab from my personal income

2 Votes

Quote from @Ryan Thomson:

@Nick Scannell I love that you are thinking about the next one already. Here are two options:

1. Wait until you can refinace out of that FHA home and get another duplex at that point.

2. Buy a single-family home with 5% down and convert a garage or a basement into another "unit"

Thank you for the post, Ryan!

That totally makes sense, and I think the refinance out of the FHA will be possible fairly quickly given the fact there's quite a bit of Forced Equity planned that will increase the value of the property. The duplex is a great start on the Spectrum of Comfort for House Hacking, but it's very possible after we do this that we will be ready to jump into a single family househack.

1 Vote

Quote from @Libby Louer-Thompson:

How would you structure a deal to buy a duplex if one partner is planning to live in the duplex and the other partner lives out of the area. I am about $50k short on my pre-qual for a duplex that I would like to house hack. My sister offered to help out but we don’t know what that would look like.

I don't have experience with this, but I love problem solving. My guess on what would make the most sense is to act a both an investor and a tenant. Assuming all things are equal (downpayment wise), it makes sense for you to get an equal benefit of Rent Savings + cashflow to your sister getting in cashflow. Start by figuring out what 50/50 would be if neither of you lived in the unit and made market cashflow. Then, your sister should get that in cashflow and you should get yours in rent savings + cashflow.

Rough example:

PITI + Expenses = 2500

Market Rents = $1500 each side ($3,000 total)

Cashflow if neither of you were living in the house = $500

Your sister should get $250 a month, and you should get $250 in rent savings (You pay $1250 a month in rent as opposed to $1500).

Would love feedback on my thoughts if you (or anyone else) has them!

0 Votes

Upstate New York, New York

Quote from @Andrew Postell:

@Nick Scannell congratulations on making that first step. I started out house hacking and it's amazing to think of where I am today. Would certainly recommend it to anyone if they have the ability to do so.

Some comments here based on what you stated:

1. You can ABSOLUTELY have 2 FHA loans. There are some rules to it - but it is possible.

2. Your commitment is to live in your property for 1 year. Then you can go out an buy another home. However, there are some tax benefits to occupying it for 2 years. Just something to think about for later.

3. There's nothing wrong with your second property being a single family home. You can certainly be financially independent with either real estate class. Sometimes we have to just take what we can get. As long as you continue to grow, you'll be fine.

4. House hacking has many benefits. One of them being your housing expense is lower. So make sure you are saving that money accordingly. Most very successful real estate investors live BELOW their means. Once you have 8-10 properties you'll have to leave $75,000 - $100k in the bank just to cover your emergencies. Get into the habit of saving money now. Cash is still king.

Anyways, hope some of these help in some way. Thanks!

Thanks for the post, Andrew! It's definitely awesome to hear the success that others in the BP community have had with house hacking. Every post like this encourages me to keep up with it!

1. Thanks! I'll definitely dig into the rules more!

2. I definitely knew about 2 of the last 5 rule of capital gains if I decided to sell, but I'll have to dig into more. I plan to read the tax strategies BP book soon (I have a lot of the BP books on my shelf to read)!

3. Great idea on single family. On the comfort spectrum of house hacking, my fiancee and I prefer separate units, but I could always consider doing a live-in flip for a second property if I don't find a house hack!

4. I 100% agree! I learned this a little later than I would have preferred (then again, who doesn't feel that way). I'm currently on a 60/40 spending-to-saving/investing ratio and working to get to 50/50. On the bright side, I'm pretty early in my career and it's fairly easy to maintain my lifestyle and put any raises/bonuses towards savings/investing.

P.S. I had a really good time reading and responding. Thanks for being a part of the BP community!

1 Vote

Quote from @Gabriel Hidalgo:

Hey Nick,

Congratulations! What an exciting time. Looking for seller financing for your next deal is a good idea, but what might make the process easier is if you have a partner or a couple lined up that would want to work with you. The partner could help with the down payment and repair costs, and you could manage the whole deal. A 50/50 split would still be suitable. Make sure to get all the roles each of you will be playing down on a contract when the whole thing goes through. Again, congratulations!

Thanks for the post, Gabriel! I'll certainly consider it!

0 Votes

Quote from @Paul De Luca:

Quote from @Nick Scannell:

BP Community,

I'm excited to say that my first Duplex just passed FHA appraisal and I'll be closing in June. Property is a 3bd/1.5 bath / 2bd/1.5 bath 2-floor side-by-side where tenants have lived for 30 and 20 years. We will be keeping tenants on the 2 bedroom side and living in and updating the 3 bedroom side with the goal of buying our second house hack next year.

My question: How do you finance the second property? While purchasing this duplex, I found out that you can't do a conventional mortgage with 5% down on anything larger than a single family, and you can't have more than one FHA. I'm thinking I'll need to start hustling to find a seller financing deal or private money, but wondering if there are other financing options. I read Craig Curelop's House Hacking Strategy, and I don't think he mentioned it.

Thank you in advance!

- Nick

Ask your lender about Home Possible and also connect with local portfolio lenders & credit unions to search for a 5% down product. What state are you in? I might be able to recommend a lender that offers 10% down for 2-4 units.

Hey Paul - Thanks for the reply! I'm in Madison, WI - really close by! I don't qualify for Home Possible because of my income, but I'm curious what other 10% down products you have. I met my lender from another local investor, and they were able to offer a 15% down conventional product with an additional ARM loan to cover 10% of it. That might be where I go if I learn from this property that I can refi and pay off that 10% loan.

Thoughts?

0 Votes

Quote from @Account Closed:

Depending on how significant the updates you're doing are, you could consider refinancing if it can appraise for higher.

Great point, Jonathan! I like where your head is at.

Most of the rehab will be cosmetic, but I do plan to refinance after we are done with the rehab. Based on comps, I expect that we'll be able to get up to 15% equity after a refinance (purchase price 429k, refi for 500k) when we're done with it.That being said, I'll need that equity to use a different loan product to move the property to an LLC.

Maybe with that refi, I could consider trying for FHA again.

Thoughts?

0 Votes

I'll second Nathan on never actually reading a study on this, but suspicion is fear of never getting started in the first place, or fear after their first roadblock to continue pushing forward.

The truth is, everything in life is risky. Investing is risky, but NOT investing is also risky.

We take risks, we make mistakes. It's being able to learn from those mistakes and continue pushing forward which makes us successful in any endeavor. Real Estate is no different.

Take action, make mistakes, learn from them, and get better.

2 Votes

All Forum Posts by: Nick Scannell

Nick Scannell has started 2 posts and replied 11 times.

Post: House Hacking First Duplex - Should I set up a separate bank account now?

Post: House Hacking First Duplex - Should I set up a separate bank account now?

Post: House Hacking First Duplex - Should I set up a separate bank account now?

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Post: 3.5% Down FHA House Hack - What's Next?

Post: 3.5% Down FHA House Hack - What's Next?

Post: 3.5% Down FHA House Hack - What's Next?

Post: 3.5% Down FHA House Hack - What's Next?

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