All Forum Posts by: Robert Rixer

Run the numbers first. Figure out how much it would cost to build, how much you could rent new build units out for and would it even be worth exploring. If you can't make the numbers work it's a non-starter. Just because the guy next door is developing does not automatically mean it pencils out.

I wouldn't dismiss them, if buyers were paying 3% caps you'd almost be a fool not to sell. But yes no doubt it definitely shielded some poor investments and made the guys vacuuming up properties in 2015-2019 look like geniuses.

Most common I see is a multifamily buyer instantly wanting to go in and rehab units without considering YOC. My rule of thumb for this is if the YOC of a rehab project is higher than the building's cap rate then it's worth it.

To add, interest rates greatly affect market cap rates too

@Justin Goodin Good point on the compounding, even just frontloading heavier increases to the earlier years will inflate the pro forma. Organic rent growth should typically match inflation. If sponsors are aggressive on rent growth, expenses should be given similar treatment.

Income looks a little light to be able to cover mortgage payments, assuming you're maxing out leverage on the VA loan. If you have rental upside, it could work out. Lenders/appraisers will often be a good backstop to prevent getting into a bad deal.

I may be in the minority here, but if your long term rental is going well, why mess with a good thing?

Don't forget the other expenses of being a homeowner over renting: property taxes, insurance, water/sewer, repairs/maintenance. There's a saying: Your rental rate is the maximum you will pay each month; your mortgage + tax + insurance is the MINIMUM you will pay each month.

Second this. There isn't a one-size-fits-all solution, you're best off building your own for your situation and types of investments. Plus you're understanding of underwriting will be way better than looking for a copy+paste solution.

The flaw in house hacking is that a property is rarely ever both an ideal investment and the ideal place to live. You usually have to sacrifice one or the other, or a bit of both.