First Property Purchased - House Hack... What's Next?
Hey BP, I've been a bit inactive but I am 21 years old and just got an offer accepted on a property in which I will live in one of the bedrooms and rent out the other two. I am going through the loan approval process with escrow closing in the standard 30 days if all goes to plan. I have two tenants lined up (of course no guarantee but odds are in my favor to have revenue coming starting within a month of escrow close). Also, I cleared with the HOA ahead of time and they are okay with renting rooms out. My goals are to not have full cash flowing property, that is a bit difficult to do with this property but I can have most of my mortgage covered. The rest is mainly utilities and reserves for any forthcoming expenses. My goal is to build experience in RE and learn how to manage tenants as well as build equity for future leveraging opportunities. I do have a very well-paying job (blessed) and that is my main focus to grow in that role to not only secure my job but also grow my salary to support more RE investments.
Here is what my forecasted income statement looks like right now.
The first question is, what flaws do you see in this? Is there somewhere where I am overestimating or underestimating?
The second question is, what are some pathways after achieving this house hack? Is it purchasing more SFRs and building a comfy equity cushion to use to invest in a multi-family? What are some of the things you guys have done after a house hack?
Any additional feedback is really appreciated. I am always open to respectful opinions and thoughts. Thanks, BP!
#3 Managing Your Property Contributor
If you have roommates, make sure when they sign the lease, you also give them a copy of the HOA documents to read and they sign off saying they have a copy, have read them, agree to follow them, and are responsible for any fines that may result from their not following them. also that violation of the HOA rules may result in termination of the lease.
With a house hack, what is your exit plan? Ie will you move out and rent that room in a few years? If so, I'd add a cleaner to the expenses (every two weeks). While the tenants need to keep it clean, having another person come in every two weeks to do the common areas is a good idea. Plus it gives you someone to keep an eye on things. Same with yard work, if you move out, who will cut the grass?
I started with a house hack. Your spreadsheet is very thorough and much more organized than when I started! I just I simply charged $400 per room, and laid out some ground rules about cleanliness, noise, etc.
So with that being said you're off to a great start and having these roommates will really help to offset your overhead on your first home.
Purchasing more SFRs after this house hack is easier said than done. If you don't have any more capital to deploy, your best best is to do some wholesaling or house flipping to build up savings. Then once you have that savings built up, start buying rentals and scale.
Quote from @Theresa Harris:
If you have roommates, make sure when they sign the lease, you also give them a copy of the HOA documents to read and they sign off saying they have a copy, have read them, agree to follow them, and are responsible for any fines that may result from their not following them. also that violation of the HOA rules may result in termination of the lease.
With a house hack, what is your exit plan? Ie will you move out and rent that room in a few years? If so, I'd add a cleaner to the expenses (every two weeks). While the tenants need to keep it clean, having another person come in every two weeks to do the common areas is a good idea. Plus it gives you someone to keep an eye on things. Same with yard work, if you move out, who will cut the grass?
this is great advice. I had not even thought about showing them the HOA docs. I will definitely include that in my due diligence.
The exit plan question is a good one... I want to move out in the next year or year and a half and rent by the room or to a family. It's a new property in 2019 built, so want to rent for about $500 over the mortgage ideally. I think having a cleaner is a great idea, and will look into that further. Do you have any other thoughts about an exit plan?
The HOA is handling all front lawn maintenance. In the backyard, there is no grass to maintain so I think I am set on that issue.
Quote from @Scott E.:
I started with a house hack. Your spreadsheet is very thorough and much more organized than when I started! I just I simply charged $400 per room, and laid out some ground rules about cleanliness, noise, etc.
So with that being said you're off to a great start and having these roommates will really help to offset your overhead on your first home.
Purchasing more SFRs after this house hack is easier said than done. If you don't have any more capital to deploy, your best best is to do some wholesaling or house flipping to build up savings. Then once you have that savings built up, start buying rentals and scale.
Great advice Scott. I think I definitely need to focus more on building additional capital now. I will look into wholesaling and house-flipping as a means to do just that.
water and garbage will cost you about $85.00 a month minimum.
@Theresa Harris fantastic advice!
Quote from @Jeremy Bruno:
water and garbage will cost you about $85.00 a month minimum.
Yes I agree! I think my utilities are a bit low.
UPDATE: Officially closed in early June and this is what the numbers are coming out to. I would really like to see what I can do to raise rents in the near future and offset some of the other costs associated with maintaining a home. I am still very pleased, before any savings costs my all-in monthly expenses are $879. Still better than renting an apartment in California and I get the added benefit of appreciation, tax savings and most importantly experience as a landlord!
Excited to see how this unfolds and even more eager to get into another deal.
