{"id":117741,"date":"2019-10-16T05:00:08","date_gmt":"2019-10-16T11:00:08","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=117741"},"modified":"2023-04-14T07:02:21","modified_gmt":"2023-04-14T13:02:21","slug":"finding-house-hacking-property","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/finding-house-hacking-property","title":{"rendered":"House Hacking Basics: Where to Find Properties &#038; How to Analyze Deals (Tips From an Expert)"},"content":{"rendered":"<p>Recently on the <a href=\"https:\/\/www.biggerpockets.com\/podcast\" target=\"_blank\" rel=\"noopener noreferrer\">BiggerPockets Podcast<\/a>, I asked real estate investor and veteran <a href=\"https:\/\/www.biggerpockets.com\/real-estate-investing\/house-hacking-strategy\" target=\"_blank\" rel=\"noopener\">house hacker<\/a> Craig Curelop, &#8220;How do you find a potential house hack? What are you looking for?&#8221;<\/p>\n<p>Here&#8217;s what he had to say.<\/p>\n<h2>How to Find Your First House Hacking Property<\/h2>\n<p>BiggerPockets&#8217; own <a href=\"https:\/\/www.biggerpockets.com\/users\/CraigCurelop\" target=\"_blank\" rel=\"noopener noreferrer\">Craig Curelop<\/a> only started investing a few years ago. But to date, he&#8217;s (impressively) hacked three houses, owns several properties, and has added $350K to his net worth\u2014not to mention paid off $85,000 in student loans in less than two years.<\/p>\n<p>BiggerPockets Podcast co-host <a href=\"https:\/\/www.biggerpockets.com\/users\/DavidGreene24\" target=\"_blank\" rel=\"noopener noreferrer\">David Greene<\/a> and I interviewed Craig to talk about his new book <a href=\"https:\/\/www.biggerpockets.com\/store\/house-hacking-ultimate\" target=\"_blank\" rel=\"noopener noreferrer\"><em>The House Hacking Strategy<\/em><\/a>, and how he&#8217;s sprinting toward <a href=\"\/renewsblog\/2016\/03\/28\/financial-freedom\/\" target=\"_blank\" rel=\"noopener noreferrer\">financial freedom<\/a> by using this real estate investing method.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/1njNcNNPXM4\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<h3>What to Look for in a Potential House Hack<\/h3>\n<p>So, what does he look for in houses to hack? Here&#8217;s what Craig had to say.<\/p>\n<blockquote><p>I think everyone looks for something different. But what I personally look for is, I really like this whole single family strategy where you rent by the room. I&#8217;ve just never really elevated my lifestyle, so I can totally continue to do that.<\/p>\n<p>What I look for in houses is the most bedrooms and the most bathrooms per dollar. In the Denver area, I&#8217;m looking for 5-bed\/3-baths for about $350 to $400,000. That&#8217;s my sweet spot. I know that&#8217;s going to cash flow if I rent by the room.<\/p>\n<p>You&#8217;re going to cash flow about $1,000 over the mortgage with that kind of property. Also, I want a property where I can have a lot of options. Maybe I can section off the bottom from the top and Airbnb it later on. Or maybe I can rent it out as a full-time unit, because I may not want to manage five people in a property anymore. And it has to work as a regular rental, too. Now, it likely won&#8217;t work as well, but it still needs to work so I can hold onto it.<\/p>\n<p>I personally also look for the location, in terms of where the path of progress is heading. Then, I basically just go in the next little neighborhood over. The prices haven&#8217;t appreciated there yet, but you know they&#8217;re going to because they&#8217;re building and building that way. I don&#8217;t think they&#8217;re just going to go <em>around<\/em> my neighborhood, you know? So, put yourself right there.<\/p>\n<p>I also look for bike paths. I&#8217;m still biking to work. I still do all that. And again, that eliminates the whole transportation costs, which is likely people&#8217;s second largest expense.<\/p>\n<p>So, by house hacking and by eliminating your transportation expense, you&#8217;re saving 50 percent of your income just by those two things right there.<\/p><\/blockquote>\n<h3>Where to Find Deals<\/h3>\n<p>Following up, I asked Craig where he finds these properties. Does he look on the MLS? Or is he more creative about finding deals?<\/p>\n<blockquote><p>I just go straight on the MLS. I think with this strategy every single deal works. It just doesn&#8217;t work for me. Financially, every single deal that has a 5-bed\/3-bath in areas that I&#8217;m looking that are $350K to $400K, they work. You&#8217;re looking at $700 to $1,000 over the mortgage (at least) every single time.<\/p>\n<p>And so then, I just look at the house itself and say, &#8220;OK, do I want to live there? Would someone want to live here if I moved out? How is the parking situation?&#8221;<\/p>\n<p>All of these kind of things. And where does the improvement come in? Is the path of progress moving that way? I just kind of look at the house and evaluate things that way.<\/p><\/blockquote>\n<p><strong><em>Related:<\/em><\/strong><em> <a href=\"https:\/\/www.biggerpockets.com\/blog\/find-real-estate-deals\" target=\"_blank\">27 Ways to Find Real Estate Deals<\/a><\/em><\/p>\n<p>Co-host David Greene chimed in, asking Craig, &#8220;Can you define what you mean by the path of progress for listeners?&#8221;<\/p>\n<blockquote><p>Basically cities tend to move in general directions. I&#8217;m gonna use Denver as an example, because that&#8217;s where I live. The heartbeat of Denver is right downtown. And then if you just go south of Denver, it kind of has already been developed. It&#8217;s kind of in the past, in my opinion. The future is north of Denver.<\/p>\n<p>Look at RiNo, for instance. RiNo is an area in Denver where five years ago, you would not step foot here\u2014because you&#8217;d probably be killed. But now, it&#8217;s one of the most popular areas in the city.<\/p>\n<p>And so, I keep going north, because it&#8217;s clear that Denver is moving that way. I&#8217;m just north of RiNo, where the property values are still cheap but I can still command the rents. Not quite the same rents that RiNo can command but still well above what I can get for the mortgage.<\/p>\n<p>This is why it&#8217;s very helpful to know what the city is planning to do.<\/p>\n<p>For example, the city of Denver is planning to put essentially an Empire State Building-type thing right in North Denver. I&#8217;m sure my properties are not going to be hurting because of that. That&#8217;s going to bring tons of jobs, and people want a place to live that&#8217;s close to their work.<\/p><\/blockquote>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-112333\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/06\/7-Steps-to-Starting-a-Nonprofit-e1561395314940.jpg\" alt=\"\" width=\"702\" height=\"328\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/06\/7-Steps-to-Starting-a-Nonprofit-e1561395314940.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/06\/7-Steps-to-Starting-a-Nonprofit-e1561395314940-300x140.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h3>Why Long-Term Strategy Is Important to Consider<\/h3>\n<p>Next, I wanted to know what Craig&#8217;s long-term plan is with these properties. Say, he buys a single family house, rents out the bedrooms, and lives in one of the bedrooms\u2014everything&#8217;s great. He&#8217;s making good cash flow and living for free. Then, he gets a girlfriend or a wife or a husband or whatever. He wants to move out.<\/p>\n<p>Maybe he gets a better job in another city. He wants to move out. What would he do then? Just continue to rent out by the bedroom? How would he analyze it?<\/p>\n<p><strong><em>Related:<\/em><\/strong><em> <a href=\"https:\/\/www.biggerpockets.com\/blog\/house-hackingfactors\" target=\"_blank\" rel=\"noopener noreferrer\">House Hacking? Consider These Factors First<\/a><\/em><\/p>\n<blockquote><p>It kind of depends on the situation as to when that occurs in my life. If that were to happen right now, I would say I would move out and I would rent out my room. And I actually have a couple of property managers that are able to do the rent by the room property management. They&#8217;re hard to find, but you just have to kind of keep looking, keep looking, keep looking. You&#8217;ll find someone that is willing to do that. It&#8217;s probably the thing I&#8217;d try first.<\/p>\n<p>If that didn&#8217;t work, again, I also look at the property to make sure that it will also rent out as a whole unit by itself and still be able to cover in excess of my mortgage (to have room for expenses, as well). So, the houses that I have will work both ways. But it&#8217;s just way more profitable to do the rent by the room strategy.<\/p>\n<p>I want to do that for as long as I can\u2014extract the most out of my dollar until I decide I don&#8217;t want to do that anymore if it&#8217;s too much work. And then, I&#8217;ll be able to sit back a little bit more.<\/p><\/blockquote>\n<p>People always want to know <a href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-investment-analysis\" target=\"_blank\" rel=\"noopener noreferrer\">how to analyze<\/a>, what they should be looking for in a house hack. I tell people the same thing Craig mentioned: analyze it both ways.<\/p>\n<p>Analyze it as if you&#8217;re living there, because you probably will (I mean, you&#8217;re going to, you&#8217;re house hacking). But then also analyze it like you&#8217;re not going to live there, because you won&#8217;t forever.<\/p>\n<p>So, do you want to buy a property that makes really good sense right now, and then as soon as you move out, you&#8217;re suddenly losing 1,000 bucks a month in cash flow? That would suck. So, analyze it both ways. Craig is on the same page.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-110846\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/05\/DC.jpg\" alt=\"Washington, D.C. city skyline at twilight\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/05\/DC.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/05\/DC-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<blockquote><p>Hundred percent agree. Also when we are analyzing the deal, a lot of times there&#8217;s too many numbers. You have the monthly payment, the mortgage, the insurance, the taxes, the vacancy, the CapEx, all the stuff. So, I am a firm believer of: you need to be a certain threshold over the mortgage for the deal to work. My threshold is between $500 and $1,000 or more.<\/p>\n<p>But that&#8217;s going to vary depending on your city. And it also varies depending on the property. On an older property, I&#8217;d want a little bit of a higher threshold, because there&#8217;s gonna be a little more room for those expenses that come up. Whereas on a nicer property, that&#8217;s a little bit newer, you won&#8217;t need your reserves to be as high.<\/p>\n<p>But the bigger that difference, the better the deal is going to be. I don&#8217;t think there&#8217;s ever a case where that was not so.\u00a0 I just think people get all caught up in these numbers. They take hours and hours to analyze deals, when I think it&#8217;s easier to literally go into a property and say, &#8220;OK, I know I can get about $3,500 for rent for this property. My mortgage will be about $2,200. I&#8217;m making $1,300 with a mortgage. That&#8217;s a great deal.&#8221;<\/p><\/blockquote>\n<p>David added that when you actually understand house hacking both from the perspective of the person who owns a property and makes income and the person who rents the room from you (because really they&#8217;re saving money, too)\u2014when you see how it benefits everyone\u2014you really wonder why doesn&#8217;t everybody in the world do this? Why is this a secret that we have to tell people about? It&#8217;s amazing!<\/p>\n<h3>How Financing Plays Into Everything<\/h3>\n<p>For house hacks, some banks have 3, 3.5, 4, 5 percent down for owner-occupied loans, which means you have to live in the property.<\/p>\n<p>I asked Craig, &#8220;Why can&#8217;t I just say I&#8217;m going to live in the property, get a 3 percent down payment, and then not move into the property? And then secondly, why can&#8217;t I just do that every month or every week, over and over and over? What&#8217;s to stop me from that?&#8221;<\/p>\n<blockquote><p>Well, bank fraud is to stop me from that. Or mortgage fraud, I should say. And if the bank does catch you, that&#8217;s five years in jail. And I think what&#8217;s worse, I mean imagine being in jail being next to the guy who killed somebody or whatever. He asks, &#8220;What did you do?&#8221;<\/p>\n<p>&#8220;Oh, I didn&#8217;t live in a house that I said I was going to live in.&#8221;<\/p>\n<p>You&#8217;ll look like a wimp in jail. So, there&#8217;s really absolutely no way.<\/p><\/blockquote>\n<p>Yeah&#8230; but on the positive side, I told him, when you&#8217;re in prison, not only do you get your housing paid for but you also don&#8217;t have to pay for your food. And no travel expenses, no car expenses. This might even be better than being homeless\u2014if you&#8217;re homeless, you still have to pay for food.<\/p>\n<p>&#8220;Prison hacking&#8230;&#8221; Craig said. &#8220;I like it.&#8221;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-114803\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/blog-banner-House-Hacking-1.jpg\" alt=\"\" width=\"700\" height=\"120\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/blog-banner-House-Hacking-1.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/blog-banner-House-Hacking-1-300x51.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/p>\n<p><em>Do you have any questions about house hacking?\u00a0<\/em><\/p>\n<p><strong>Ask in the comment section below.\u00a0<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>On the BiggerPockets Podcast, co-hosts Brandon Turner and David Greene sat down with Craig Curelop, author of The House Hacking Strategy and three-time house hacker. How does Craig go about finding deals and analyzing them prior to purchasing a house to hack? And what&#8217;s his long-term RE strategy? Find out here.  <\/p>\n","protected":false},"author":710,"featured_media":114972,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5183],"tags":[],"class_list":["post-117741","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-landlording"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/117741","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/710"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=117741"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/117741\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/114972"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=117741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=117741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=117741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}