All Forum Posts by: Ryan Hebert

This question is for current or previous house hackers or others familiar with the numbers surrounding house hacking in HCOL areas:

As part of one of Brandon's webinars, I wrote down his rules of thumb for analyzing rental properties (in his market): $100 positive cash flow per unit, Cash on Cash ROI of 12% or higher (double risk premium of S&P 500 historical to justify added work and risk). I have analyzed a dozen or so properties and so far only one has met these standards in class B areas. That property, plus the highest possible purchase price to reach those two metrics, also fall under what I suppose could be called the "0.8% rule."

Now, those benchmarks Brandon mentioned are for Washington, a much different market than metro Boston Massachusetts, my market. Given the market differences between LCOL and HCOL, are these benchmarks too aggressive? Too conservative?

I also have been analyzing my house hacks with the assumption of all units being rented out, with effectively me "renting" as one of the tenants. This would make the only real calculated benefit of house hacking versus buying a multi-family be the low down payment. When running the numbers, is there another metric I ought to run that takes into account my being an owner occupant and improves the ROI from a certain perspective of accounting for not having to pay rent for primary residence?

If anyone has a house hacking analysis calculator they have created in Excel, I am also quite interested in order to inform my current spreadsheet.

Thanks everyone! Availability seems light at the moment, but I'll keep my eye on the MLS and keep Framingham on my radar.

@Alexandra Page, what about using TransUnion Smartmove? Technically, the applicant isn't paying any fee directly to the landlord, but to TransUnion, who then sends the credit report and background check to the landlord. Has there been any legal clarification on middlemen like this?

 @Brent Coombs, at least in the Metro Boston market, I have analyzed deals where positive cash flow can still be attained by the 0.8% rule. And with a HCOL area like Metro Boston with little doubt about its future economic prospects, sure you could argue the 1% rule will be surpassed at some point. Hold it for long enough, sure 2% is inevitable. Ideally, this would also be after adjusting for inflation, so real rent increases.

But the idea that you could get 2% in a HCOL area without higher risk (older property, bad neighborhood, lower demand, worse schools) of bad tenants? Color me skeptical. Especially when you're dealing with such a tenant-friendly state as MA.

 Would this not assume that rental rate must exceed property appreciation? In Boston, it tends to be the other way around, unless you are calculating JUST off of the initial purchase price.

I reckon this is true. It reminds me of the old investing adage: more risk = more reward; less risk = less reward. Economically wealthy areas have fewer blow-out deals, but hold their value. Where in Massachusetts could you find 2%? Maybe somewhere in Fitchburg or Holyoke. Alas, I would hate to be there in 2008.

I lived in Framingham for a few years when I was really young, and even after moving I still spent quite a bit of time in the town. I picture its location, and I can only picture that it has enormous potential.

You have easy access to the Pike from multiple parts and subsequently commutability to both the I-495 and 128 technology belts, a commuter rail station to Boston, a growing public university, vibrant shopping at route 9, a bunch of relatively new reputable breweries, etc. It is also very close to wealthy suburbs like Wellesley, Natick, Sudbury and Wayland. Albeit to a lesser extent, it reminds me of Waltham: for a long time a rough and dirty city positioned perfectly and surrounded by Boston Brahmin towns.

Yet...property values are still low, rents are low, and it still has a reputation for being a rough now-city to live in. I'm someone interested in multi-families, so the northern half of SFHs north of route 9 doesn't interest me nearly as much as the center. I can't seem to find longitudinal crime data or property data, but what are your thoughts on it? Is this a city with untapped potential as people get priced out of inside 128, or is it too far from Boston and too suburban to move much from its current status?

I am also quite interested in Lowell, but its reputation for crime certainly has me a bit concerned. It would seem the southern parts of Lowell and around the university are safe, but what about the other parts? How do they compare in crime to Lawrence, Lynn, Chelsea, Roxbury, etc.?

@Charlie MacPherson   Are there safe areas in the South Shore with commutable access to the Pike/128 that would be appropriate for a multi-family house hack? Brockton, New Bedford and Fall River definitely don't qualify, and Plymouth is likely too far from work.

Obviously, this is all speculative, but I have been pondering the same things. A few things to add to it:

While there certainly is a trend of working from home or telecommuting, I do not foresee brick and mortar offices going away. It will be an even longer time before they invent neural implants that override the human brain's social needs! As such, I do still think jobs will continue to be centered around major metropolitan areas, with long term growth most prominent in the most business-friendly areas. However, I do agree with you that this will make commutes a lot less of a factor, up to a certain point. I think this will cause the "suburbs" to expand outward into what would now be the exurbs, and the exurbs to expand into what is now rural land. For some, the commute time could itself count toward the work day as work is done while the car drives itself. For others, the time spent reading the morning news, listening to a daily podcast, and eating breakfast could all be done on the commute instead of before it.

Right now, property values inside the urban and suburban areas are sky-high. Once self-driving cars expands the range of conceivable commute, I imagine people will flock to the cheap real estate of the exurbs and build them up. Some other interesting side-effects: properties right now elevated in value by closeness to commuter rail stations may lose that premium if the self-driving cars make mass transit obsolete, and municipalities are going to compete with each other much more strongly on all benefits OTHER than their location (e.g. school quality, property taxes, ordinances, crime). You could see the desirability of individual municipalities shift all over the place once you remove all location but general proximity to a city from the equation.