All Forum Posts by: Paul R.

I'm working on my first go-around of tenant screens for a house hacking arrangement.  The potential tenants are aware that I'm the PM and neighbor.

Rent: $1,600

Tenant 1: a few years about of school, excellent previous landlord references, two jobs, seemed clean cut and put together, Gross Income to half / full rent: 6.77x Half Rent / 3.3x Full Rent

Volunteered dad (well qualified cosigner) who agreed to be cosigner and passed all screens.

Tenant 2: Similar life status and feel as Tenant 1, lives with parents (no rental history), toured apartment with his mom, Gross Income to half / full rent - 3.6x Half Rent / 1.83x Full Rent.

Would you require a cosigner for tenant 2 or is tenant 1's dad enough when combined with both incomes? I work in the "what if" industry, so naturally the "what if" in a friends fight comes up.

Everything else checks out on both (strong credit, no evictions, no criminal, etc.).

Ask the broker which carriers (markets) they shop. Often they shop the same but relationships between certain carriers and brokers are common. DM me if you still can't find coverage. I know of a landlord with hundreds of units units having flat roots.

@Nicholas P.

I'm wondering if that was written by a lawyer who doesn't understand insurance. It's unfortunately quiet common. That section is very poorly worded at best. Honestly, they should show you proof of their insurance.

Ouch ouch ouch. Yes did you have an inspection before buying? Sounds like KC doesn't have a great sewer lateral program.

Investment Info:

Small multi-family (2-4 units) other investment in St. Louis.

Purchase price: $320,000 (10K below the lender's appraisal)
Cash invested: ~$77,000

House Hacking / Residence

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

I wanted to get out of renting and start investing at the same time. House hacking seemed like a great way to accomplish both of these goals. The tax benefits were not a deterrent either with my W2.

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

Walking down the street and saw the FSBO deal.

How did you finance this deal?

Conventional Bank Financing and had cash for full value ready to go as an inducement to seller.

How did you add value to the deal?

Light rehab on second unit's kitchen, new flooring on third floor, a fresh coat of paint, cleaning, lots of random handyman work. Fixing the previous owners rookie electrical mistakes that cut off electric to almost the entire second floor.

What was the outcome?

Still working on it. I'm hoping for forced appreciation and a breakeven cash flow situation.  The neighborhood comps are supporting at least 20% forced appreciation (60-70K).

Lessons learned? Challenges?

Neither the worst case and best case scenarios always happen. Avoid catastrophizing and overly optimistic thinking.  Information is power. I contacted the owner prior to the investor one I bought from and learned ALL about the property, which allowed me to have a stronger negotiating position.

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

David Ounanian and his recommended lender.  David knows the game has a very solid network, all of which is invaluable for a newbie.

Exit clauses are of utmost importance in any entity with more than one member or owner. Every partnership ends, but you choose how it ends at the beginning.  It's typical for entities without exit procedures to end with mortal kombat. 

Also and when deciding exit clauses, consider the resource equity / inequity available to the parties. If your partner has more wherewithal, make sure that it could never be used against you (i.e. Out lawyer, or low ball you into a shotgun deal).

Sorry for ranting - this is something I've seen many times before.

Re: Networking - As I heard not too long ago - The STL REI gene pool is small and the good gene pool is even smaller. At the local events, you'll learn who is good real fast and who to listen to.

Thanks Patrick. How did you find your first deal? Do you go to participate of the local REIAs? 

Justin, thanks for the welcome.

@Rachel E. Krawcyk

I would never self-insure for liability unless I had no assets and planned on never having assets.

Unvelievably bad things can and do happen. Like someone else said, insurance handles the defense (very tiresome and expensive) and puts up the money for settlements and judgements.

With self-insuring a property or auto itself, the maximum potential loss is finite.

Hello World -

I've been following the site for a couple of months and done quite a bit of research / reading.  Now, it's time to graduate from school being a sideline observer.  I'm considering house hacking a duplex in the central corridor as my first deal and then onto BRRRRing.  

I also occasionally go to my corporate job that is super enjoyable like all corporate jobs. My goal is to use REI as a way to fire my W2 (and it sounds more interesting that the cube). I love anything to do with numbers, dollar signs, creating & implementing efficient systems, and analysis paralysis.

It looks like there are quite a few other locals on here and in the game. Cool