$200k+ corporate salary, wanting to house hack to get ahead
Member since 2023 · 4 posts · 5 votes
$200k+ corporate salary, wanting to house hack to get ahead
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Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
3yAt 200+k per year, you are in the top 5% of earners in the country. With that and house hacking, you could accumulate a lot of savings quickly and never have a concern over sufficient reserves.
11 Replies
- 3yJosh YoungPro MemberRental Property Investor / REALTOR® / Property Manager · Gilbert, AZ · Member since 2023 · 384 posts · 421 votes
@Mark Smith If you are worried about cash flow and the chance of losing your job then you want to put as little down as possible and save as much cash as you can for reserves, living in the property as your primary residence should help you with this. Don't buy in a shady/high crime area, I know it's a limited inventory for small multi-family properties in good areas that are affordable, but there are a few. The other option would be to buy a house and rent out the rooms, this should cash flow better and you will have more options to buy in a better location. Do you currently own a home that you will be keeping as a rental or will this be your first home?
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Mark Smith:
Hi all!! Thanks for checking out this post.
I’m from Scottsdale AZ. I have $50,000 I want to dedicate to my first multi family investment which I’ll live in for one year.
I’m scared of losing my money, here’s why:
1. Rates are high. I’m worried the property won’t cash flow enough. If I lose my job, I’ll have a big mortgage payment. Yikes!
2. Property values… Many say prices are going to collapse.
3. Looks like I can only afford an apartment in a somewhat shady/high crime area. Others are pretty far away from Phoenix (Sun City).Here’s the question! Should I be investing elsewhere? Nonresidential commercial? I want to start my real estate investing career as fast as possible but I don’t want to make a decision that’s going to set me back.
If you do househack on primary , even if the rate is 20% you would still positive cash-flow LOL
- 3yJason WrayPro MemberBanker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
Mark,
Arizona has a little bit of a hit/miss forecast when it comes to home values. AZ shot up during COVID and over the last 4 years. Its starting to show signs of weakness and home prices are slowly coming down in certain areas. That being said you also have over priced inventory and they are in the middle of no where or hot zone desert. I was looking at some multifamily homes for sale yesterday in Tucson, AZ.
A duplex was FSBO at $450K 2bd 1 bath duplicate sides and it was a in the middle of nowhere. That same duplex in either Indiana, Tennessee, Georgia, Florida or Ohio would cost $185K+/- but in an area where you can rent and be next to a college, beach, river or other attraction. My advice would be check out some "Out of State" options. You will spend less money and still cash flow even with a property management fee if you choose to use one.
You only need 15% down for a rental property which includes any 2-4 unit rental. I would suggest looking at a Portfolio program they are very popular with multifamily rentals. Building a large network is key in real estate and it can be done on here on Bigger Pockets. Find the right members who are well versed in REI. Contact some great real estate agents, Bankers, Loan Officers, Property Managers, Contractors, and other investors.
Work with all of them like a "One Stop Shop" to satisfy all of the needs required for the start to finish process. Researching for a property could be as easy as making a few phone calls to a seasoned agent. Funding the deal could be through a Bank/lender or other like minded investors here on BP.
- Investor · CO · Member since 2016 · 757 posts · 1k+ votes3y
Mark,
I'm a numbers & history guy so that's where I tend lean.
1. Cash flow. Play the numbers out and see where they come out. Big mortgage, but also big income. Its actually safer because if you lose your job, the other units are paying part of the mortgage as opposed to you renting or owning a SFR. I also had nice corporate salary when I made the jump with lots of angst, but its best to jump into the unknown. It is a calculated risk, but a lot safer then keeping the money in the bank or in stocks in my opinion. Rates, I stopped looking at the rates a long time ago. I date them and as long as I'm comfortable with the number, I pull the trigger.
2. So what? Prices have always bounced back a lot better than your 401k. Again play the numbers out over the investment time horizon which should be long term 5+ years. I've got friends who check in with me 2x a year asking if now is the time to buy, if the sky is about to fall... 10yrs later they haven't bough a thing, and I've accumulated 10 units and retired from the corporate world.
3. Looks like? I'd recommend firming up your numbers, go talk to the a broker lender and real estate agent. If you need help running numbers, there is no shortage of tools or folks who would be happy to help out.
But honestly, start with the goal in mind and working your way backwards to your current situation helps cut through the noise. Couple things to consider:
- Do you want to be active or passive?
- Build wealth or cash flow?
- Do you like be able to check on your place ofter or not? In/out state sort of thing.
I've tried a fair amount of strategies and settled on the build equity first, then reposition to cash flow on a portfolio I could keep my eyes on.- Do you need a place to live?
- 3yHamp Lee IIIPro MemberReal Estate Agent · San Antonio, TX · Member since 2019 · 1k+ posts · 832 votes
Welcome to BiggerPockets!
Real estate investing (REI) is a numbers game. If the numbers work for you and the purchase is within your comfort level, make the purchase.
There are no "sure things" with REI. You can mitigate your risk by doing your due diligence.
I once had the same focus as you with wanting to live in a multifamily. The potential neighborhoods were declining so I pivoted to a new SFH. I lived in it for almost two years and rented it out. It cashflows over $500 monthly today.
Comfort level.
Pivot.
Due diligence.
I hope this helps.
I wish you all the best.
- Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes3yMan makes $200k a year and can only afford to rent in a shady high crime area.
Quote from @Mark Smith:
Hi all!! Thanks for checking out this post.
I’m from Scottsdale AZ.
I can only afford an apartment in a somewhat shady/high crime area.
What is this world coming to....
Here is link to an apartment finder for Scottsdale that might help you avoid having to live in scary surroundings until you get your investment life in gear: https://www.apartments.com/apartments/scottsdale-az/max-1-bedrooms/?bb=iy5ixgpzkMyxgu9ta&so=2I am looking at "Large Apartment complexes with pools, hot tubs, gates, workout rooms, etc..vs SFH's and am seeing some nice looking offerings.
i set the finder for studio, 1BR units in Scottsdale for larger complexes.
Going to visit a few during the after dinner hour and seeing the cars and other renters will give you an idea if this is your kind of place or not.
I am also seeing "RENT CONCESSIONS" meaning the owners are having trouble filling the units and are offering free X months of rent, or other goodies such as lowered move in costs.
Picking one with a good management company will make you happier than one that is always at contention with the renters.
Also realize that the model units they show you will be "Dolled Up" and more fancy than yours most likely, so ask to see a unit that is ready for move in vs just the model, and see if you like it.
No furniture, Craig's list or rent it.
Good Luck!
- 3yMason WeissBusiness MemberRealtor · Phoenix, AZ · Member since 2021 · 523 posts · 239 votes
Hey @Mark Smith, I resonate with the risks you mentioned but I think you also have to look at the opportunity. In ten years, do you think that a property won't have appreciated in value? Do you think there will be an opportunity to refinance to a lower rate? Do you think after securing your first property you won't find it easier to secure your second? House hacking is difficult but not impossible in the Phoenix area. I have a client who is about to close on a househack duplex for his first property. There are wins out there in every market cycle! Have plenty of reserves to keep you comfortable, but remember it is impossible to win if you don't play the game.
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
You're letting fear control your thoughts and experience. Don't.
I, and a lot of other investors here, bought when interest rates were 18% and we had jobs that were barely making ends meet. We did fine. Why, because we're smarter or luckier? Nope. We just went and did it.
You need to do your homework and run your numbers. And reset your thinking. For example, Sun City is not far from Scottsdale. About 30 miles....if this is a huge problem for you, then you may not be cut out for this business.
Look at your assumptions:
1) Rates are high. I just addressed that, but no they're not high, they are historically LOW.
2) Property values. People are always saying that prices will collapse - everywhere in the country. And they may be correct for some properties...but yet people are buying non-stop. Why? Because there is never a bad time to buy RE, just buy the right place.
3) Seriously? You can only afford an apartment in a high crime area in this huge metropolis? Wrong...give that $50k cash you want to invest to almost any investor here and watch.
You need to reset your thinking and find a good advisor/mentor. Keep asking question on here and learn about this business, it is clear that lack of knowledge is your weak point...
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes3y
At 200+k per year, you are in the top 5% of earners in the country. With that and house hacking, you could accumulate a lot of savings quickly and never have a concern over sufficient reserves.
- 3yNoah CorwickPro MemberRealtor · Phoenix, AZ · Member since 2021 · 271 posts · 115 votes
Hey Mark,
Definitely a legitimate concern. The market right now is interesting.
Out of curiosity, how does that $50k breakdown? For example, is it all for the downpayment? Or you including funds for a possible rehab of the units?
You are right that AZ prices are high now, as we are a state that is not a secret anymore. However, as far as cash-flowing right away, that will be difficult to do anywhere you look based on the current interest rates. It's not just happening in our state.
Even if you don't cashflow right away, tenants paying half or 3/4s of your mortgage for a year to two isn't the worst thing in the world. Then once rates drop and you can refinance the magic begins. If you are in it for the long term and intend to keep this property for many years to come, then the investment will likely be worth it.
- 3yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
If you buy with FHA financing you only need 3.5% down for a duplex, a bit more for 3-4 units.
So, your $50k puts your purchase price pretty high!
The challenge will be finding a property that will cashflow.
Beginning investors need to STOP believing all the fluff about rental investing, especially with the overheated real estate market trending to historic norms. Many believe unrealistic assumptions and often apply those assumptions to the wrong property classes.
In our OPINION (always verify your area for yourself!):
Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenants: Majority will have FICO scores of 680+.Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenants: Majority will have FICO scores of 620+, some blemishes, but should have no evictions in last 5 yearsClass C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should often be used to also cover nonpayment & evictions.
Tenants: majority will have FICO scores of 560-600, many blemishes, but should have no evictions in last 2 years. Verifying previous 2-years of rental history very important!
Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenants: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions.Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
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