All Forum Posts by: Tom Conant

I've been reading books and listening to the podcast non-stop for the past 18 months. I went to a realtor in Fresno looking for a multifamily to house-hack. Fresno can be a rough area, so there were only certain areas I was comfortable moving my fiancé into. After about 8 months I became frustrated that of all the deals I analyzed, the numbers rarely seemed to work. Of the few that did, they were quickly snatched up with all cash offers and my FHA financing was laughed at.

Ultimately I decided to look for an off-market deal.  I have @Jason Pritchard to thank for this.  He talked with me on the phone a few months back and offered some great advice.

I wanted to find a property in the Fresno High area, which is where I currently rent.  For those not familiar with Fresno, it's full of buildings from the 1930's-1940's with charm and character, are generally maintained well by their owners, and is right next to the Tower District, which has a lot of restaurants, bars, and small shops, as well being the artistic and trendy area of Fresno.  I'd call it a B class neighborhood with some A class properties on some of the nicer streets, and C class on the edges.

I pulled property records for every 3 and 4 unit building in this area, which came to about 60 properties.  I then put the addresses into an app meant for delivery drivers to plot an efficient route for all 60 properties.  Since I've been analyzing every muti and single family that has hit Zillow in this area for the past year, I had no trouble driving to each property and estimating what rent I could expect as well as what it would likely sell for should I choose to flip it (not my goal).

20 properties were taken off the list for safety reasons for my fiancé, leaving 40 nice properties.  Next to each one, I entered an offer price that I knew would allow the property to cash flow.

Using this information I wrote 40 letters, and heard back from one.  It's 1840 sqft triplex with two one bedroom units, a studio unit, and a detached 2 car garage.  All units individually metered for electricity, and each unit has their own small back yard.  I met the owner at the property the next week, and put it under contract that day.  Here are the numbers:

Purchase Price: $250,000
Current Rent: $1750 ($475/$575/$700)
Estimated Market Rent: $2500 ($650/$850/$1000) - I believe this to be conservative
PITI: $1495
Water/Sewer/Garbage: $200

Because it was an off market deal, I ended up needing a lot of help with the contract so the bank would accept it.  I used @David Greene loans, and honestly I couldn't have done the deal without them.  They helped me with some problems with my original contract and walked me through the whole process.

California has rent control, which limits me to increasing rent by 5% annually plus inflation based on the consumer price index.  For 2020 that was 1.4%, meaning I am limited to a max rent increase of 6.4% per year assuming everything stays the same.  Assuming an annual 3% market rent increase, it will take me 9 years to get the studio to market rent, 10 years for the larger one bedroom, and 13 years for the middle unit (currently rented at $575).

My plan is to move in to the middle unit and live in it for one year.  I'm choosing the middle unit because the tenant has been a problem tenant, it will take me the longest to get it up to market rent, and it needs to be remodeled which I want to do myself.  Once I finish that, my plan is to look into turning the detached garage into a 4th unit.  Currently it's just used as storage and there is ample street parking, so for the small value it currently provides I believe another unit will be a better use for it.

If everything works out perfectly, I will then refinance the whole property and pull out as much equity as I can.

Essentially, this is an off-market-deal/house-hack/live-in-flip/value-add/BRRRR. Have I missed anything else preached here? :)

All of this will require me to learn more about remodeling, permitting, zoning, and working with the city, which is an added benefit.

Next step is getting the middle tenant out.  I'm trying to find a lawyer to help me with this, and my initial plan is Cash for Keys and then go from there.  I will update as this project moves forward.

Really excited for my first deal.  This is the first of hopefully many.

Any advice or questions welcome.

Thank you everyone for the replies.  I will see what his rates are and then take it from there.

If I'm not impressed, or if I need more creativity than he is capable of offering, I will see out someone else.

Good advice, Lisa.  Thank you.

Hey Chris,

Thanks for the reply.  I did not use the term "house hacking."  I'm aware that's a BP term, so I just explained in plain English (or so I thought) what I was trying to do.

I'm looking to do my first house hack in Fresno, Ca. I stated I was planning to live in the property for a year, and then look for another so I could take advantage of the favorable financing that would qualify me for. Because of that, I am looking for a property, first and foremost, that I consider a good investment. I spoke with a loan officer my agent recommended and had a number of questions about conventional vs FHA loans, and often I would express that I was looking for an education of what my options were depending on what property came available that I would want to move on.

For example, I said I did not know if I wanted to buy a duplex, triplex, or 4-plex, and that it would depend on the relative value I saw.

I also asked about USDA loans as I live in a city with a neighboring rural area, and he said he has never done a USDA loan but would get back to me.

At this point the conversation shifted.  He asked me what my intentions were, and if I was planning on lying and moving out after only a couple months.

I want to be fair to him.  He has a license to protect, and I understand that if I was actually planning on moving out prematurely that he wouldn't want to do business with me.  I get it.  I wouldn't do business with me either if that was my intention.

I explained again what I was trying to do and that seemed to satisfy him.  In an effort to relieve the tension he said he just had never worked with someone who was trying to do what I was trying to do.

My question is this: is house hacking that unusual?  Does this suggest a lack of experience/knowledge on his part?

If I'm being honest here, it pissed me off, but I'm trying to put that aside.  I'm here to make money, and maybe that even speaks to his credit that he was willing to be very upfront with me about his concerns.

Just want to get some other thoughts and insights.  I'm still figuring out what I think about it.

Appreciate heads with more experience and cooler than mine at the moment.

My income increased by about 50% with my new job and I am barely over the income limit to qualify for a USDA loan with my current Salary.

Technically I'm still below it, but in February I will receive a 5% raise which will put me above the upper limit.

How will my income be calculated for qualification purposes?  Will my most recent pay stub be projected outward, or will prior W-2's be used (last year's, for example, is about $25k below the limit, and the one before that even lower).

If W-2's are used I could still qualify.

Could someone help shed some light on this for me?  I've been looking on my own but haven't found anyone address the issue of a recent and large pay salary increase.

I'm 33 and finally in a position to start pursuing a goal I've had for a long time.

About me: I went to UC Davis and came out with a business degree, and worked in real estate for a short time in my early 20's before exploring other avenues of business.  I graduated in 2008, so "exploring other avenues" might be another way of saying I was laid off from a lot of jobs during the recession :)

Long story short, I realized i had another calling at 27 and worked hard to become a firefighter, which I finally accomplished this year.  If I learned anything during those years, it's that persistence is powerful.

I love my job, and after years of working as a paramedic I finally have a decent income.  With my current expenses (which are low - the only advantage of working for $17/hr for years) I've been able to save $2k a month (plus any overtime I work), which I have been using to pay off the credit card debt I accumulated (nothing crazy, but I had some big automotive expenses).

I finally have that paid off, and am starting to save for my first investment property.  I have been listening to the BP podcast and have been reading every real estate book I can get my hands on (or listening to them on audible during my drive from Sac to Fresno).

I am mostly looking at out of state investing because of the high prices here in my state. The BRRRR method makes sense to me, and would require I save around $100k in cash before I could take on my first deal. That will take me about 3-4 years depending on overtime, during which I plan to learn as much as I can. I am not interested in a hard money lender. I'm well aware I may screw up my first few deals, and don't want to owe somebody money when I do.

I am also considering house hacking a multifamily to cover my mortgage, which would not only help me save more money each month, but also give me some experience in the process. Plus with a 3.5% FHA loan, I can realistically expect to be in a position to do that in less than 6 months

Anyway, it's a pleasure to meet you all.  I know there is so much knowledge and experience here to help me learn, and I'm looking forward to spending more time here.