Newbie starting with a house hack? Where would you go?
Member since 2023 · 29 posts · 13 votes
Newbie starting with a house hack? Where would you go?
Most Popular Reply
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
3yQuote from @Abi Horton:
HI,
I am currently living in Long Island, NY (and I hate it here). I was going to buy a condo in Miami (I used to live there and would love to move back) but since realized its just not a good investment move to buy a condo in Miami and cant afford to buy something that would give me some kind of return). So now I think it will be smart to buy a multifamily somewhere and would like to house hack and rent the other unit(s) as MTR, so I am considering somewhere near a hospital and have seen OH come up as potentially a good area for cash flow so have looked at Cincinnati and Cleveland. I can afford around $200-250k. My question is, if you were starting from scratch and could go anywhere, where would it be?
Appreciate any advice! :)
This would generally depend on what you're after. Are you looking for appreciation or cashflow? If cashflow is what you're after, I would highly recommend Cleveland. The cash flow is king up there, however appreciation is lacking and seems to be along with the US national average. Whereas cities like Columbus have some cash flow, but tons of appreciation!
32 Replies
- Real Estate Broker · Portland, OR · Member since 2018 · 126 posts · 71 votes3y
As a house hack, you need to owner occupy so it really comes down to where do YOU want to live that is affordable and makes sense for a first investment. Sounds like you need to spend some time in the car traveling to some of these destinations and making a choice. There are projects all over the country that people make work. Find the place you want to live, then deep dive into the local market and find a project that matches your goals.
- Realtor · Ogden, UT · Member since 2019 · 338 posts · 415 votes3y
Quote from @Abi Horton:
Thank you, I hadn’t really considered this. Would that still be classed as a “multi family property”?Quote from @Brad Jacobson:
$200-250k doesn't buy much multifamily in most markets so I would encourage you to consider purchasing a single family residence with an ADU (accessory dwelling unit or mother-in-law apartment) as well as small multifamily options.
I know from personal experience that house hacking is a sacrifice so in order to be willing to do it long term, you still need to be comfortable where you are. Single family homes with ADUs are an excellent alternative and I bet your budget would get you much further with an option like that in whatever market you choose!
Good luck!
It's definitely the best way to house hack!
And no, those type of properties are just that, single family residences but with an ADU. Almost all cities (at least in my expiernce) allow ADUs but by owning a single family home, you'll pay less property tax, have more inventory to pick from, be able to acquire the property with just 3-5%, etc. etc.
- Rental Property Investor · Miami · Member since 2022 · 247 posts · 75 votes3y
ABi
My personal opinion House hacking is a starting point for single or young ... It will be back to roommates' situations.
After many years of being a realtor ... Someone introduced me to multifamily. When you learn the numbers, best ways to qualify for financing, you get a business not just a house with roommates, the income is two or three independent apartments and the potential in equity building is 3 times more.
But your budget, you payments is only for one unit still, the rest of the building gets paid by the rent of your tenants.
Simple you get a business you hire a professional manager and your partners (tenants) only participation is to give you capital so you build wealth.
Look for a group, or team that helps you to acquire and manage multifamilies and you will build wealth for you and your family.
The information is here in Bigger pockets...
advice
Information with out action ..... is just information.
good luck
- Real Estate Agent · Member since 2018 · 459 posts · 414 votes3yI like the idea that you’re willing to sacrifice to make a change in your life! Most people would be scared of this idea. Here are a few things to consider:
Quote from @Abi Horton:
HI,
I am currently living in Long Island, NY (and I hate it here). I was going to buy a condo in Miami (I used to live there and would love to move back) but since realized its just not a good investment move to buy a condo in Miami and cant afford to buy something that would give me some kind of return). So now I think it will be smart to buy a multifamily somewhere and would like to house hack and rent the other unit(s) as MTR, so I am considering somewhere near a hospital and have seen OH come up as potentially a good area for cash flow so have looked at Cincinnati and Cleveland. I can afford around $200-250k. My question is, if you were starting from scratch and could go anywhere, where would it be?
Appreciate any advice! :)
No matter where you live, you’ll be able to house hack. How well you do it depends on location and you. It is a business and expectations of yourself and your tenants are to be at that level. No matter where you go, if you lower the bar for yourself or anyone living there, it will turn into a nightmare.
Consider your quality of life: where do you want to live? Consider your long term goals: what is your plan with this property in 5 years? How much appreciation will you capture in 3 years if you hard living there and need to move? I’d consider a place with appreciation and equity over cashflow if you’re planning on house hacking. No matter what, you’re saving a lot of money house hacking! And if you’re able to liquidate $50k in equity in 3 years tax free when you go to refinance/sell, how long would it take you to cashflow that much in OH? I would go that route and then buy something that cashflows. Leverage equity and appreciation while living there and then buy cashflow with it. Hope that helps! - Member since 2023 · 29 posts · 13 votes3y
Quote from @Lawrence Potts:
I like the idea that you’re willing to sacrifice to make a change in your life! Most people would be scared of this idea. Here are a few things to consider:Quote from @Abi Horton:
HI,
I am currently living in Long Island, NY (and I hate it here). I was going to buy a condo in Miami (I used to live there and would love to move back) but since realized its just not a good investment move to buy a condo in Miami and cant afford to buy something that would give me some kind of return). So now I think it will be smart to buy a multifamily somewhere and would like to house hack and rent the other unit(s) as MTR, so I am considering somewhere near a hospital and have seen OH come up as potentially a good area for cash flow so have looked at Cincinnati and Cleveland. I can afford around $200-250k. My question is, if you were starting from scratch and could go anywhere, where would it be?
Appreciate any advice! :)
No matter where you live, you’ll be able to house hack. How well you do it depends on location and you. It is a business and expectations of yourself and your tenants are to be at that level. No matter where you go, if you lower the bar for yourself or anyone living there, it will turn into a nightmare.
Consider your quality of life: where do you want to live? Consider your long term goals: what is your plan with this property in 5 years? How much appreciation will you capture in 3 years if you hard living there and need to move? I’d consider a place with appreciation and equity over cashflow if you’re planning on house hacking. No matter what, you’re saving a lot of money house hacking! And if you’re able to liquidate $50k in equity in 3 years tax free when you go to refinance/sell, how long would it take you to cashflow that much in OH? I would go that route and then buy something that cashflows. Leverage equity and appreciation while living there and then buy cashflow with it. Hope that helps!Thanks, I am originally from the UK and have lived in many different places so moving isn't really such a big deal, I have my own business that I work from home so also have time to put in to run real estate as a business. You make a good point about appreciation, of course I want that but its really hard to know where/if thats going to happen in the next few years with the way the economy is. So house hack was really just to offset my living costs to be able to save more really. And yes you can house hack anywhere but you have to be able to afford to buy something that is house hackable. I can only afford a 1 bed condo in Miami (where i want to live) but if I house hack somewhere I can afford a multifamily, it will afford me to be able to travel to Miami (and other places) more often.
The idea for this property is to live in it for 1 year and then buy something else to do the same.
Thanks for your advice!
- 3yEric FernwoodBusiness MemberRealtor · Las Vegas, NV · Member since 2014 · 996 posts · 1k+ votes
Hello @Abi Horton,
I moved to Las Vegas from New York City. I understand why you hate it there. I did too.
Assuming you have the freedom to choose any location, below is what I would do.
Location
The first and most important decision to make is to choose a location. The location determines all long-term income characteristics. I would start with Wikipedia's list of metro areas with a population greater than 1 million and apply each of the following elimination filters. Once you have eliminated all locations that do not conform to all the following criteria, you will have a short list of locations to evaluate. The elimination criteria are as follows.
- Metro area population size greater than 1M. Small towns may rely too much on a single business or market segment. Wikipedia
- Inflation compensation - The location determines whether rents will increase fast enough to offset inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. Rents lag prices, so you can use the appreciation rate if you do not have historical rental data. Zillow Research
- Both state and metro populations are increasing. Do not buy anywhere if the state or metro populations are static or decreasing. Wikipedia
- Low crime - High crime and long-term appreciation and rent growth are mutually exclusive. Do not invest in any city on Neighborhood Scouts’ list of the 100 most dangerous US cities.
- Low operating cost - High operating costs can turn what appears to be a profitable property into a money pit. The three most apparent are income taxes, property taxes, and insurance. Insurance - ValuePenguin, Metro Property Taxes - LendingTree
- Rent control - Some states and metro areas have implemented various kinds of rent control. Rent control may prevent you from increasing the rent fast enough to keep pace with inflation. It may limit your property manager's ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any location with rent control.
- Low disaster risk - When a tornado or other natural disaster strikes a city, it doesn't just obliterate individual properties. The entire community, including jobs, shopping, and retail, is destroyed. Your tenants won't wait for your property to be rebuilt in a year or two; they'll move immediately to a location where they can work and live today. Even if your insurance company rebuilds your property, there may be no one to rent it. Everyone in the community will have resettled in other locations, and there's no reason for employers, retail establishments, or people to move back. Locations hit by natural disasters may take many years or never recover. However, your mortgage, taxes, insurance, maintenance, and other expenses will continue without interruption.
Once you've narrowed the list of locations, the next criteria is the presence of a good local investment team.
Everything you learn from seminars, podcasts, books, and websites is general in nature. You won't be buying a general property in a general location. Instead, you will be purchasing a specific property in a specific location that is subject to specific local rental regulations. The only source of such information is an experienced local investment team that has years of experience. You cannot duplicate what took a team of people years to learn. Plus, working with an experienced investment team costs no more than working with any other realtor.
If I did not find a good local investment team in a location, I would look for another location.
Target Tenant Segment
A rental property is no better than the tenant who occupies it. You want your property continuously occupied by what I call a “good” tenant. A good tenant is someone who stays for many years, takes care of the property, and pays all the rent on schedule.
You can find a tenant segment with a high concentration of good tenants by interviewing multiple local property managers. Once you identify a target segment, determine what and where they are renting today.
Property Selection
If your plan is to house hack, it's always wise to have a backup option. In this case, the backup option would be using the property as a long-term rental. Therefore, buy properties similar to what your target segment is currently renting. This way, if you ever decide to change it to a long-term rental, you'll have applicants from your target tenant segment.
When we work with clients who wish to house hack, we usually select properties with four bedrooms and three baths, and a three-car garage. We have standard renovation items, but when we are doing properties that will be used for house hacking, it does change some items. For example, we usually put commercial-grade nylon carpets in bedrooms. For a house hack, I would install LVP to lower turn costs. House hacking requires other small changes to our standard renovation, but not that many.
Summary
Making money in real estate is a straightforward process. It starts with selecting the right location because the location determines all long-term income characteristics. Next, select a tenant segment with a high concentration of good tenants. Lastly, select a property similar to what your target tenant segment is renting today. You will want a property that is also suitable for house hacking. For example, a four bedroom, three bath, three car garage property.
Abi, I hope this helped.
FERNWOOD Team, KW VIP Realty520 Reviews - Member since 2023 · 29 posts · 13 votes3y
Quote from @Eric Fernwood:
Hello @Abi Horton,
I moved to Las Vegas from New York City. I understand why you hate it there. I did too.
Assuming you have the freedom to choose any location, below is what I would do.
Location
The first and most important decision to make is to choose a location. The location determines all long-term income characteristics. I would start with Wikipedia's list of metro areas with a population greater than 1 million and apply each of the following elimination filters. Once you have eliminated all locations that do not conform to all the following criteria, you will have a short list of locations to evaluate. The elimination criteria are as follows.
- Metro area population size greater than 1M. Small towns may rely too much on a single business or market segment. Wikipedia
- Inflation compensation - The location determines whether rents will increase fast enough to offset inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. Rents lag prices, so you can use the appreciation rate if you do not have historical rental data. Zillow Research
- Both state and metro populations are increasing. Do not buy anywhere if the state or metro populations are static or decreasing. Wikipedia
- Low crime - High crime and long-term appreciation and rent growth are mutually exclusive. Do not invest in any city on Neighborhood Scouts’ list of the 100 most dangerous US cities.
- Low operating cost - High operating costs can turn what appears to be a profitable property into a money pit. The three most apparent are income taxes, property taxes, and insurance. Insurance - ValuePenguin, Metro Property Taxes - LendingTree
- Rent control - Some states and metro areas have implemented various kinds of rent control. Rent control may prevent you from increasing the rent fast enough to keep pace with inflation. It may limit your property manager's ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any location with rent control.
- Low disaster risk - When a tornado or other natural disaster strikes a city, it doesn't just obliterate individual properties. The entire community, including jobs, shopping, and retail, is destroyed. Your tenants won't wait for your property to be rebuilt in a year or two; they'll move immediately to a location where they can work and live today. Even if your insurance company rebuilds your property, there may be no one to rent it. Everyone in the community will have resettled in other locations, and there's no reason for employers, retail establishments, or people to move back. Locations hit by natural disasters may take many years or never recover. However, your mortgage, taxes, insurance, maintenance, and other expenses will continue without interruption.
Once you've narrowed the list of locations, the next criteria is the presence of a good local investment team.
Everything you learn from seminars, podcasts, books, and websites is general in nature. You won't be buying a general property in a general location. Instead, you will be purchasing a specific property in a specific location that is subject to specific local rental regulations. The only source of such information is an experienced local investment team that has years of experience. You cannot duplicate what took a team of people years to learn. Plus, working with an experienced investment team costs no more than working with any other realtor.
If I did not find a good local investment team in a location, I would look for another location.
Target Tenant Segment
A rental property is no better than the tenant who occupies it. You want your property continuously occupied by what I call a “good” tenant. A good tenant is someone who stays for many years, takes care of the property, and pays all the rent on schedule.
You can find a tenant segment with a high concentration of good tenants by interviewing multiple local property managers. Once you identify a target segment, determine what and where they are renting today.
Property Selection
If your plan is to house hack, it's always wise to have a backup option. In this case, the backup option would be using the property as a long-term rental. Therefore, buy properties similar to what your target segment is currently renting. This way, if you ever decide to change it to a long-term rental, you'll have applicants from your target tenant segment.
When we work with clients who wish to house hack, we usually select properties with four bedrooms and three baths, and a three-car garage. We have standard renovation items, but when we are doing properties that will be used for house hacking, it does change some items. For example, we usually put commercial-grade nylon carpets in bedrooms. For a house hack, I would install LVP to lower turn costs. House hacking requires other small changes to our standard renovation, but not that many.
Summary
Making money in real estate is a straightforward process. It starts with selecting the right location because the location determines all long-term income characteristics. Next, select a tenant segment with a high concentration of good tenants. Lastly, select a property similar to what your target tenant segment is renting today. You will want a property that is also suitable for house hacking. For example, a four bedroom, three bath, three car garage property.
Abi, I hope this helped.
Wow thank you so much for such an in-depth thought out response. This is really helpful! I will certainly be looking at these things! Thank you!
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