House Hacking Research #2- Ask/Answer any House Hacking Question!

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Hello everyone, 

This is part 2 of my research project for house hacking. Please let me know any questions you have surrounding house hacking. If you have the answer to any question  you see, feel free to answer. 

Thank you!

How do you go about being an owner and neighbor? Do you tell them you're the property manager for a group of owners? Like they know who they're paying, unless a third party app handles that.

Hi Craig,

So glad this thread was started!

Is it worth it to go for a multifamily unit and carry more risk? My goal was to buy a townhouse/condo with three bedrooms to rent out the other two. In the process of researching RE, I discovered BP and realized that you guys have the term "house-hacking" for this and there's a lot of emphasis on multifamily properties. So I started looking into multifamily properties in my S Florida area (admittedly only on MLS sites like Zillow/realtor.com) and there are slim pickings with massive price tags. While I can put a 20% down on a condo, I'd only be able to put 5% down on a multifamily so I'd be in a highly leveraged, risker position.

The numbers at a glance (1%, 50%, and 70% rules) seem to work out better for me with a condo than with a multifamily, but I think I'm struggling with multifamily FOMO lol. 

Can't wait to hear any input on this.

P.S. I just listened to your episode on the podcast yesterday, and I'm a big fan of your way of life. Looking into Turo since I've taken to using public transit lately.

@Craig Curelop any tips for how to FIND duplexes etc? Orlando, FL here and would love to start researching/pricing out a duplex/triplex house hack to save myself money (rent is outrageous $1200+utlities for my 1 bedroom thats actually really nice). I try to look on zillow, loopnet, realtor.com, and it seems there are very few and far between options that I could find... when you go into a house hack with multiple units, do lenders typically see the income potential for the other half and allow you to borrow more than youd be approved for on any traditional house? Very new and just learning, but hope to get started asap.

After house hacking for a year, how do one get a second property to house hack?

@Craig Curelop Hey guys what type of property do you think is best for house hacking ? I’m 22 at the moment I want to have a house by 25 (3-4 years) I’ll most lIkey take out a commercial loan, I live in Long Island New York Nassau county “ suburbs”. The goal of course is to buy early use my time as an advantage and love and rent out the rest and advice . Thanks family

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We just closed on our first house hack two weeks ago and are doing renovations on our side currently. If you have done a house hack before, how did you keep track of expenses? Any tips specific to the financials for house hacks? I opened a separate bank account for our rent checks and applied for a different credit card that we will only use for purchases that are going toward the tenant side and pay with the new bank account. Do you pay yourself a certain amount every month from that bank account? I know that there are lots of ways to do it so just wanted to know things that have or have not worked for you. 

In terms of taxes, has anyone tried to do their own taxes while owning a house hack? Any tips on this? I am thinking next year it seems worth it to hire a cpa. 

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If your house hacking in college how do you set up the rents?  Because most people go home during the summer, so you won’t be able to collect rent for 2-3 months.  How do you avoid this problem?  Do you just jack up the rent for during the year and make it super cheap during the summer?  Is it still profitable to house hack in college if you can’t get someone to rent during the summer? 

@Andrew Wright You just have them sign a year lease. Even if they are your friends, this is so standard that any place they live otherwise would require it. Make sure that you have a contract, even if they are friends and they understand what is expected of them. We live in a college town and for students who leave in the summer they either try to find a sublet (which is difficult) or just stomach the two months that they aren't living there.  

@Minh Nguyen I house hack in a single family and I think the townhome works. In some ways I wish I would have gotten a townhome the HOA and limitations pushed me away however not having to maintain the property cold make your investment the much more passive.

In my area multi families are telling the same story so I choose a four bedroom. If you do a four bedroom townhome I imagine that it will be very easy to find a cash flowing property.

Is there a bigger benefit in paying cash vs finance when you house hack?

You charge either a higher monthly rate for a 9 month lease or you start the leases every year right as the semester ends. I did this successfully for 4 years in college in Norman, OK until I bought & fixed up more properties & became an out of state landlord & now a syndication passive investing enthusiast or fund manager.

Originally posted by @Minh Nguyen :

Hi Craig,

So glad this thread was started!

Is it worth it to go for a multifamily unit and carry more risk? My goal was to buy a townhouse/condo with three bedrooms to rent out the other two. In the process of researching RE, I discovered BP and realized that you guys have the term "house-hacking" for this and there's a lot of emphasis on multifamily properties. So I started looking into multifamily properties in my S Florida area (admittedly only on MLS sites like Zillow/realtor.com) and there are slim pickings with massive price tags. While I can put a 20% down on a condo, I'd only be able to put 5% down on a multifamily so I'd be in a highly leveraged, risker position.

The numbers at a glance (1%, 50%, and 70% rules) seem to work out better for me with a condo than with a multifamily, but I think I'm struggling with multifamily FOMO lol. 

Can't wait to hear any input on this.

P.S. I just listened to your episode on the podcast yesterday, and I'm a big fan of your way of life. Looking into Turo since I've taken to using public transit lately.

@David Greene posted a nice article about house hacking yesterday:  

https://www.biggerpockets.com/blog/house-hacking-c...

The key is to realize that every market is different with respect to the best house hacking strategy.  Where I am from in Small Town, New England, there is a big supply of triplexes and 4-plexes, and if you look hard enough, you can find one that achieves the 1.5% rule and allows you to live for free. 

However, I lived in Tampa for five years and know that Florida is a different animal altogether.  Multifamily is scarce, and the ones you do find tend to be high end with numbers that just don't work.  In the larger cities of Florida, I'd look more toward finding a deal on a single family or condo, provided you don't mind having roommates.  However, I'd be careful with these highly cyclical markets given the run up. 

If you don't want roommates and have the down payment, there is no rule saying you can't buy a cash flowing asset of any kind and use that cash flow toward rent.    That would allow you to buy that multifamily in Any Market, USA and live more comfortably and privately in Florida.

How have SFH hackers navigated regulations regarding rooming houses and/or boarding houses? They seem to vary from city to city but explicitly target these type of setups.

@Laura Hines

@Laura Hines - responding to your first post. A CPA is pretty critical especially if you continue to buy more properties. If you're living there you really want someone to document and help correctly calculate mortgage interest write off percentage of a primary residence and depreciation. I live in the back unit of a triplex I own and I just feel more comfortable having them submit my taxes with the blessing of their review than do it on my own. 

The credit cards and bank account are ok although I have 4 properties now that I keep detailed P&Ls for which I turn over to my CPA and I do not have a separate account/accounts for the properties and to date I have not had any flags raised because of this - knock on wood.

One thing I would make sure to avoid is submitting 1099s for work done by contractors. Keep it one way or the other. Send them to everyone or no one as their seems to be a grey area here on whether they are required on residential 1-4 unit deals.

Keep a log of the time you spend as they are getting more strict on the reporting to justify qualifying as a real estate professional which as Im sure you know, depending on what you make at your day job can have a tremendous benefit at the end of the year when it comes to rental income. 

Hope this helps.

Rob

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@Robert Hooks Lots of good information- thank you! I started looking into CPA already because I figured it wouldn't be worth my time (and stress). Especially with a house hack it seems more complicated. 

So do you have one bank account for all four properties (or is it combined with your personal funds)? I also just thought it may be easier for me to keep track of them with separate bank accounts. 

When using hours to qualify for a real estate professional would hours renovating our side of the duplex? I would assume that they wouldn't. Same question with 1099s, we are hoping to do most of it ourselves for now, but if we do exceed the $600 limit, would that only apply to the tenant side? 

@Laura Hines Re the 1099s I would consult what sounds like your eventual CPA on their opinion Mine just told me once you send one you need to send all, so dont send any until a mandate gets passed. Saves you time and risk, but I'd just be clear up front with whoever may do work above the $600 limit on your place that you do not intend to submit a 1099. Most will say ok.

I have one bank account for all of them and to be honest I find it easier as I know all of the rent checks go in and all of the expense checks go out of the same account.... it helps me back track and have confidence I am not missing something because I may have paid it from a different account. I guess one more account wouldn't be a bother I just have not gone that route. Perhaps I should.

I'm a commercial broker so I think that helps me qualify as a real estate professional as well, but you'd me amazed how many things you do add up to quite a lot of time spent on the property/rental activities. Aka driving to and from to pick up materials etc.

On the one side question you could (and perhaps should) put it into an LLC and then you can lease back your unit from the LLC - BUT wait until the loan is packaged up and sold off as you do not want to do anything that would allow some jerk lender to call the loan due.

Again I would ask your CPA on these points as I am not an accountant and am not qualified to give professional advise on these subjects.

R

@Adam Widder in my experience, be honest.

I first told my tenant I knew the owner and was just managing the property. A year and a half later...we have a great relationship. About six months into his lease, we were talking and I told him that I was the owner...he chuckled and said that he knew the whole time. (It get to be pretty obvious when you are answering all the calls...cutting the grass...making all the repairs...and not to mention, its public record)

@Adam Widder we actually hired a property manager, and they told the renters that we are also tenants. It creates a degree of anonymity and allows us to focus on other things, including finding the next deal. I manage the property manager, and they handle everything else.

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