All Forum Posts by: Dean V.

Hey Gunnar!

Good on ya for getting started so early!!  Personally, I'm a big believer in hitting the low-hanging fruit (easiest kill) first, which is part of the reason I'm such a huge proponent of househacking!  It also has some of the lowest barriers to entry, lowest risk, highest error/learning tolerance, and best returns on your investment of any real estate investing strategy out there.

That being said, if you're living with your parents and currently paying $0/mo for rent, the numbers on a househack may not look as appealing while you're living there since you wouldn't really be "saving" any money on rent.  But remember, one of the best advantages of househacking is that if you're trying to build a portfolio, you can purchase a property for low money down and then lather/rinse/repeat every year - meaning after you move out you'll be able to rent the unit/room you were previously living in, potentially making the income/cashflow/return numbers a lot better after only one year!

Without knowing the specifics of your market, I'd say run the numbers on a couple of different scenarios to see what would be the most beneficial for you, but I'm going to take a guess here and say that househacking as a strategy will still probably make a lot of sense for you, and here's why I think that:
- I'm going to assume that you can find a home to househack where you can continue to live rent-free (your tenants pay >= 100% of your mortgage and all expenses including utilities, repairs, etc.)
- If you can find a property that meets the above, you will still be in a better situation than continuing to live rent-free with your parents since you will be building equity in the home (both through your tenants paying down your mortgage, as well as through natural appreciation of the home as the market continues to go up long-term, and also through any forced appreciation you create through home improvements...again ideally funded by your tenants' rent)
- You'll also be able to reap lots of tax benefits that you would not be eligible for with solely W2 income
- You will be gaining the experience of buying, owning, operating, and maintaining real estate, screening and managing tenants, etc. all in a relatively low-risk environment compared to jumping right into a pure investment property/multi-family/etc. (not to say that this isn't totally do-able though!)
- Even if you're just breaking even/covering all expenses

Again, definitely go run the numbers on lots of specific properties in your area fitting various strategies, since everywhere is different...small multi-family properties in your area may have HUGE returns compared to single family homes, in which case I'd say consider going that route and either living in one of the units as a pseudo-househack, or just continuing to live with your parents and renting out all of those units to tenants. Look at turn-key properties, BRRRR, and just straight-up buy-and-hold, and in addition to how good the returns are on each of those strategies, also consider how much time, effort, and money you have and/or want to put into a property as an additional discriminator between them.

Finally, clearly define your goals up front, this will help a lot in your decision (and making the right one).  You mention cashflow, and if that's your main goal then great!  But consider if cashflow in the short-term (beyond covering expenses on the property, enough to build reserves, paying yourself for your time, etc.) is the most important to you since you already have a W2.

Give me a shout if you have any specific analysis questions, would like a second set of eyes on any analyses you run, or anything else you're curious about!

Best of luck!!

Cheers,
Dean

Hey Asare!  Welcome in advance to you and your wife!  And as others have said already, HUGE kudos on getting into househacking - in my opinion it's the MOST powerful strategy in real estate investing by far (at least when starting out ;-) haha).
I've been picking up as many househacks as I possibly can on my journey, and believe in it very strongly as an outstanding tool for building wealth and financial freedom.

Is there a particular area or neighborhood around Denver that you're interested in, already looking at, or curious about?

Multifamily properties here in the Denver area are in super high demand and as such are typically pretty overpriced right now in my opinion.  I believe that you can still have privacy and comfort (and actually cashflow even better than MF in most cases) with a single family househack if you find the right floorplan and property, but it really all depends on your goals and what level of effort/expense you're looking to put in (definitely a sliding scale of comfort and elbow grease vs profitability).

I work closely with @Craig Curelop and shameless plug if you haven't read his book, it is in my opinion one of the best and most concise resources for househacking knowledge and strategy out there.

If you have any other questions or there's ever anything I can do for you, don't hesitate to reach out, always happy to help out however I can!
 
Cheers,
Dean

Hey Erin!

I'll start with the typical "it depends" - what are your goals with the investment property (cash-flow in the short term, long-term appreciation, how quickly are you looking to buy additional investment properties, etc.)?

My personal attitude is generally to put as little of my own money into investment properties as I can so I can have more cash available to scale more quickly and/or put into other investment opportunities (and of course for things like emergency funds, reserves, etc. depending on your situation and if you already have these things or other ways of reducing risk).
As long as it can pay for itself (including reserves), as little down as possible is my ideal strategy since I don't really care as much about cashflow in the short term.

Obviously putting more money down will lower your monthly payments and increase your cashflow on the property, especially when having the opportunity to borrow the rest at a lower rate with the HELOC (also, 7% seems a little high, have you talked to multiple lenders?).

My two questions would be:
1) Does the investment property meet your goals/criteria (adequate cashflow, ROI, etc. whatever is important to you) with the 7% interest/20% down loan?
2) If so, maybe stick with the 7%/20% loan and look for other investment opportunities that you could put that HELOC to use on!
2.5)  If not, either consider using the HELOC to get it there as you were thinking, or maybe keep searching to see if there are better investment properties out there instead that better meet your goals using the conventional financing.

Not sure what your situation looks like, but have you looked into second home/"vacation home" loans?  Due to a recent change, your interest rate will likely be similar that of an investment property, but you should be able to put as little as 10% down.

Cheers,
Dean

Hey Juan!

I use TenantCloud for all of my properties.  It's not as "mature" as some of the other software out there such as Avail, Buildium, or AppFolio, but I believe they're all also a good deal more expensive (more "professional" oriented for PMs with LOTS of units).
It does everything you mentioned, and everything we've needed it to do for our property management needs (electronic leases, electronic signing of leases, tenant screening with background checks and credit scores, electronic rent collection/payment with receipts, store leases and other files, a whole maintenance request/management module, and listing/advertising of available units for rent, plus I'm probably forgetting some things).  There is a very basic accounting feature in there too, but we actually don't use it anymore, instead we use Stessa (a free, but very powerful site) for all of our business' accounting.
All this from TenantCloud costs us about $12/mo for unlimited tenants and units.
They also have a free version if you want to give it a trial run, but the $12/mo version was well worth it for us.
Comparison of their plans here:  https://www.tenantcloud.com/pricing/

I've also heard good things about RentRedi, but haven't used it personally so can't vouch for it.  From my research, it appears to be similar pricing (actually cheaper than TenantCloud at $9/mo if you pay annually) and features to TenantCloud, but maybe slightly more "polished".
Their features are listed here:  https://rentredi.com/landlord-features/

Give me a shout if you have any other questions!

Cheers,
Dean

Standard "not financial advice" disclaimer (I hate that crap lol but such is the world nowadays), but my personal strategy right now is to take out as much *GOOD* cheap debt as possible since I agree with you that I see rates continuing to rise for at least the next few years as well as I suspect that inflation will still take quite a while to bring back down under control, pending what any potential recession might look like as you alluded to.

What do I mean by "good, cheap" debt?  To overly simplify: debt used to purchase an income-producing asset (like it sounds you're planning to use it for) that you can borrow at a rate lower than the rate of return you expect to get from that asset.
Even if property prices decline during a potential recession, I think the general consensus is (and I tend to agree), that the most we'd see unless there's WW3 or another crazy black swan event would be a temporary pull-back of ~10%, and as long as you're still cashflowing based on income/expenses, you should have no problem holding until the market comes back up, which it inevitably will.

What I would caution you on though is make sure to read all the fine print of the HELOC! What are the specifics of the variable rate (probably Prime + a certain percentage), are you locked into 3.25% for a certain introductory period of time (maybe 12-18 months), how often can/does it adjust, what are the rate caps, what is the initial draw period (probably interest-only, this is where you can use it like a credit card, revolving) vs payback (likely unable to use it as revolving past this point, now payments are principal + interest amortized through the end of the payback period) [this is a common HELOC structure, but yours may be different], etc. - to be safe, make sure whatever deal you're investing the HELOC money into still works at your "worst case" rates, and/or have a plan to be able to pay back the HELOC early if rates spike so you can avoid paying that higher interest.

Just curious - where are you living/what are you looking to purchase where $250K will only fund a down payment??  Wow, I'm in Denver and even here things aren't quite that bad (yet) haha!
Have you thought about investing out of state where your money might go further and/or possibly get better returns (if cash-flow is important to you)?

As long as you factor your worst-case HELOC payments into your expenses and your investment is still cash-flowing (including expected vacancy, reasonable reserves, etc.), I would not consider that to be over-leveraged, but everyone's risk tolerance is different so do what makes sense for you!
Foreclosures is a tough one...I personally don't think we're going to see a big "wave" of them like some people were/are expecting, mainly due to how much appreciation we've seen over the past few years and how much equity almost everyone has in their homes right now.  It wouldn't make a lot of sense.  I think we'll get back to roughly normal foreclosure levels at some point soon, but seriously doubt there will be a big flood of cheap foreclosures at auction or REOs like 2008.

Cheers,
Dean

Hey Brian!  Great to hear you're doing your due diligence and going through some good tenant screening, that's so important and makes a huge difference in getting the right tenants and avoiding issues down the road, so kudos!

For me personally, I've always taken the "honesty is the best policy"...policy for all of my househacks, and have been super up-front that I am the owner and will be living in the same home/unit next door (depending on how your househack is set up).  I find that it not only sets expectations so that no one is surprised/disappointed/angry if they end up finding out later (which they likely will), and it also saves you the hassle and wasted time of weeding out anyone who has an issue with this (probably a good thing, if they're good tenants they most likely won't care if the owner/landlord is living there too, as long as you're cool ;-) haha).

I do know that some folks try to distance themselves and not let their roommates/tenants know that they're the landlord or owner, even so far as having someone else act as property manager for them.  I totally get this, as it can be a fine line and some tenants may end up bugging you constantly asking to fix things or whatever if they know you're the owner and you're right there and accessible.  For that reason I think it's very important to have good systems and boundaries in place right from the get-go in order to mitigate this if they do know (or find out) that you're the owner.

Cheers,
Dean

Hey Craig!  Congrats on starting your real estate investing journey!

I hear ya - my business partner and I were both living in California when we first started investing in real estate and had much the same thought as you (higher cost of entry where we were living) and started looking out-of-state.

I'll also say that places like CA and NY don't tend to have the most landlord-friendly laws, which shouldn't necessarily be your only decision point, but could certainly be a factor in your choice of where to invest.

All that being said, we decided to start investing in Dayton, OH and have had pretty good luck up there so far!  A LOT of people invest out-of-state, so it's certainly very feasible and can be very advantageous - if you're considering it, I'd highly recommend the book Long‑Distance Real Estate Investing by David Greene to learn about how to invest out-of-state well and set yourself up for success.

What are your goals, and what are you looking for in an investment property?  I can't necessarily tell you what state to buy a property in since they all have different advantages/disadvantages based on what you're looking for, but I will say that there are a TON of markets out there that you can be very successful in.  We chose Dayton for several reasons:
- The stereotypical midwest "low cost of entry" market
- Smaller local market with less competition
- Still good cashflow and positive market dynamics (population and job growth, etc.)
- We had a few contacts up there that we either already knew personally or came highly recommended and allowed us to quickly build a strong, trusted team right away (David talks a lot about the importance of a strong Team/"Core 4" in his book and on the BP RE Podcast)
- Downside:  we're not seeing anywhere near the appreciation that "hotter" markets throughout the country, such as Denver, Austin, etc. have been seeing over the past few years

Let me know if you have any other questions I can help with!

Cheers,
Dean

Investment Info:

Single-family residence buy & hold investment in Englewood.

Purchase price: $532,000
Cash invested: $36,000

Contributors:
Craig Curelop

Denver househack #1! Single family home converted into two separate "units" - long-term (annual) rental upstairs while living in the finished basement downstairs.

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

Was moving out to Denver and looking to buy a property that I could leverage as an asset and not just a liability...especially with the sky-high cost of living and housing in Denver.

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

Craig "The FI Guy" Curelop was my agent and we found this as an on-market deal!

How did you finance this deal?

Partial VA-loan, with the remainder being conventional through my incredible lender Mike Stone with Megastar!

How did you add value to the deal?

Sweat equity - built a kitchen from scratch in the basement and did most of the other miscellaneous work (adding washer/dryer hookups, adding interior doors to create separate entrances, etc.) myself, saving tons of time and money (contractors were booked way out, expensive, and extremely hard to find).

What was the outcome?

Found some awesome tenants for the upstairs unit and lived in the downstairs unit rent free!

Lessons learned? Challenges?

A good contractor is invaluable to have a relationship with...otherwise, be prepared to invest LOTS of time and effort in construction.

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

Craig Curelop, Mike Stone

Investment Info:

Single-family residence buy & hold investment in Englewood.

Purchase price: $525,500
Cash invested: $40,000

Contributors:
Craig Curelop

Denver househack #2!! Single family home converted into two separate "units", with the upstairs being rented full-time as a short term rental.

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

Was interested to get started in the short term rental world, and a househack seemed like a great way to do it!

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

Found it on-market with the help of Craig "The FI Guy" Curelop.

How did you finance this deal?

Purchased via an "all-cash offer" through one of the power buyer companies, then took out an owner-occupied conventional loan through them.

How did you add value to the deal?

Househacking is insanely powerful as a value-add for lower down payment, living for free (rent-avoidance), and actually required in this city to be able to run a STR due to their local regulations. Sweat equity on the conversion of the single family home into the two separte "units" as well as the STR furnishings purchases and setup.

What was the outcome?

So far it is getting great reviews and cashflowing like CRAZY!!! Even without counting the rent I'm saving!

Lessons learned? Challenges?

Everything takes longer (and is more expensive) to order/deliver/setup/install than you think! If you know that your strategy is soild and the numbers work...don't hesitate, just pull the trigger!

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

Craig is amazing! Highly recommend him and the other The FI Team agents!