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Jeffrey McKee
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  • Plano, TX
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Talk about a House Hack! Millionaire living on Galveston Island, Texas

Jeffrey McKee
  • Real Estate Agent
  • Plano, TX
Posted Jun 15 2023, 11:50

What are yall's thoughts on adding a mansion-style house hack to your portfolio? I know what everyone is thinking...,if you can afford a million-dollar property you wouldn't rent the rooms. Well let's say you can't afford it, but you could get a DSCR loan and or a partner that would help with downpayment. Could this be a good short-term rental play? Grab value while they are low and sell in a few years. Let's talk texas gulf coast while we are at it. I am Legit looking for a short-term rental near the Gulf of Mexico so I can begin to act on the sail around the world in a sailboat dream.

Grand Manor Mansion is located in Galveston's East End Historic District and has been named one of the top 9 B&Bs on the Island
  

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Wilson Vanhook
  • Rental Property Investor
  • Texas - Conroe/North Houston
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Wilson Vanhook
  • Rental Property Investor
  • Texas - Conroe/North Houston
Replied Jun 15 2023, 12:12

Would buying a property with a DSCR loan be considered a house hack? To me, when you say house hack, that means buying a property as a primary residence with a low down payment, living in it for a year, and then moving out and renting it. Or buying it, living in a room and renting the rest of the rooms out. But if you use a DSCR loan, it's an investment property at that point with 20% down and you just rent it out like any other investment.

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Jeffrey McKee
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Jeffrey McKee
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  • Plano, TX
Replied Jun 15 2023, 12:55
Quote from @Wilson Vanhook:

Would buying a property with a DSCR loan be considered a house hack? To me, when you say house hack, that means buying a property as a primary residence with a low down payment, living in it for a year, and then moving out and renting it. Or buying it, living in a room and renting the rest of the rooms out. But if you use a DSCR loan, it's an investment property at that point with 20% down and you just rent it out like any other investment.


Good point, yes a house hack would be more of an owner-occupied loan with a lower downpayment instead of a DCSR loan. FHA wouldn't work for a jumbo loan but a conventional owner occupied loan could allow for a lower downpayment. I have heard of a 1% dp, conventional, owner-occupied loan but again that may not be suitable for a jumbo loan.

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Michael Baum
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  • Olympia, WA
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Michael Baum
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Replied Jun 15 2023, 14:09

It is a very cool looking house. Needs some work on some of the sleeping spaces.

It is a currently operating as a traditional bed & breakfast?

It would qualify for a SBA loan as an operating business. 

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Jeffrey McKee
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Jeffrey McKee
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Replied Jun 15 2023, 14:28
Quote from @Michael Baum:

It is a very cool looking house. Needs some work on some of the sleeping spaces.

It is a currently operating as a traditional bed & breakfast?

It would qualify for a SBA loan as an operating business. 


 Agreed, I love older architecture.  Yes, it is one of the most well-known bed and breakfasts on the island.  A property like that doesn't come for sale often.  

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Michael Baum
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Michael Baum
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Replied Jun 15 2023, 19:13

I wonder what the numbers are like on it. The listing doesn't mention selling the business side.

EDIT - I see the ad said B&B but the Loopnet ad says AirBNBs.

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Matt McGuire
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Matt McGuire
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Replied Jun 16 2023, 08:29

I agree with Michael, you need to run the numbers. If you are trying to put 1% down and finance $1.3M, you are looking at somewhere in the neighborhood of $10k/mo just for the principal and interest. Then you need to set aside for capex, repairs, and vacancy. Can you imagine how much it costs to put a roof on that place?!    

Its a pretty risky venture if you ask me. 

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Dave Foster
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Dave Foster
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Replied Jun 16 2023, 09:39

@Jeffrey McKee, The story you're wanting to paint is the path we chose!  Go for it.  We spent 10 years and then sailed away on a sailboat paid for with tax free dollars, 3 waterfront vacation rentals paying for the sailing, and a custom built dock in the back of one for when we were in town.  All without paying anything in taxes on the real estate.  You can do it.

You can read about this journey and our specific case study in the book - Lifetime Tax-Free Wealth: A Real Estate Investors Guide to The 1031 Exchange.

A couple of suggestions - 

1. A beautiful older house like that will have more hidden expenses than normal.  Don't get stuck in port taking care of the money pit.  Your goal is to sail away not have a cool house right?

2. Get a vacation rental on the water for a couple reasons

.    -You have a home for your sailboat when in town.  And you can stay there for extended times while still renting the main house out.

.    -If you put the right dock configuration in you can also rent out a small power boat with the property.  We doubled our money by renting out the house and renting the boats.  During peak months the boat rental was required.  

.    

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Jeffrey McKee
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Jeffrey McKee
  • Real Estate Agent
  • Plano, TX
Replied Jun 18 2023, 17:00
Quote from @Michael Baum:

I wonder what the numbers are like on it. The listing doesn't mention selling the business side.

EDIT - I see the ad said B&B but the Loopnet ad says AirBNBs.


 @michael,  I can reach out to them and see if they have any rental history or p and l statements associated with the business.  Let me know if you would like that information 

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Jeffrey McKee
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Jeffrey McKee
  • Real Estate Agent
  • Plano, TX
Replied Jun 18 2023, 17:07
Quote from @Dave Foster:

@Jeffrey McKee, The story you're wanting to paint is the path we chose!  Go for it.  We spent 10 years and then sailed away on a sailboat paid for with tax free dollars, 3 waterfront vacation rentals paying for the sailing, and a custom built dock in the back of one for when we were in town.  All without paying anything in taxes on the real estate.  You can do it.

You can read about this journey and our specific case study in the book - Lifetime Tax-Free Wealth: A Real Estate Investors Guide to The 1031 Exchange.

A couple of suggestions - 

1. A beautiful older house like that will have more hidden expenses than normal.  Don't get stuck in port taking care of the money pit.  Your goal is to sail away not have a cool house right?

2. Get a vacation rental on the water for a couple reasons

.    -You have a home for your sailboat when in town.  And you can stay there for extended times while still renting the main house out.

.    -If you put the right dock configuration in you can also rent out a small power boat with the property.  We doubled our money by renting out the house and renting the boats.  During peak months the boat rental was required.  

.    

Thank you very much for the encouragement.  All very wise words.  I am in the building phase of automating the real estate sales business and building out a team to oversee day to day operations.  I am  very interested in water front property in the gulf.  I think that would be the starter goal for the dream. 
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Michael Baum
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Michael Baum
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Replied Jun 18 2023, 17:17
Quote from @Jeffrey McKee:
Quote from @Michael Baum:

I wonder what the numbers are like on it. The listing doesn't mention selling the business side.

EDIT - I see the ad said B&B but the Loopnet ad says AirBNBs.


 @michael,  I can reach out to them and see if they have any rental history or p and l statements associated with the business.  Let me know if you would like that information 

Thanks @Jeffrey McKee, but that isn't something I would look at.

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Replied Mar 7 2024, 07:21

This mansion was formerly a formal Bed and Breakfast. it has the legitimate hotel fire protection devices and systems such as stairway lighting, pull down alarms and a full commerciall alarm system which are a bouns $40-50 k system not found in other places. The rare Greek revial style of the home with 16 inch thick concrete and brick walls makes this a fortress. It is well suited to remain a fairly dmage free structure during any hurricane which is a huge cost consideration on island.

The mansion has no exterior clapboard wood and requires much less maintenance than other woodedn victorian homes or modern beach houses in that respect. In terms of business , I love my beach home but people do not book a beach home on a dreary January day, but this place is fully booked in Janaury because couple love to walk the downtown, take in an opera and live the Manhattan  lifestyle right on the island and you dont have to get in your car .

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Jeffrey McKee
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Jeffrey McKee
  • Real Estate Agent
  • Plano, TX
Replied Mar 7 2024, 08:44
Quote from @Brian Bertsch:

This mansion was formerly a formal Bed and Breakfast. it has the legitimate hotel fire protection devices and systems such as stairway lighting, pull down alarms and a full commerciall alarm system which are a bouns $40-50 k system not found in other places. The rare Greek revial style of the home with 16 inch thick concrete and brick walls makes this a fortress. It is well suited to remain a fairly dmage free structure during any hurricane which is a huge cost consideration on island.

The mansion has no exterior clapboard wood and requires much less maintenance than other woodedn victorian homes or modern beach houses in that respect. In terms of business , I love my beach home but people do not book a beach home on a dreary January day, but this place is fully booked in Janaury because couple love to walk the downtown, take in an opera and live the Manhattan  lifestyle right on the island and you dont have to get in your car .


 You know alot about the property.  What would rooms rent for by the night, weekend, and monthly rate? 

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