Real Estate Agent · Dallas, TX · Member since 2020 · 7 posts · 5 votes
Hey BP friends,
I am beginning to search for a property to house hack in the DFW area. If all goes to plan, I'll house hack here and use the BRRRR method for 3-5 years, acquiring 2-3 properties during this time. I plan to move after this time period. If I move out of the area, I'll either sell or hire property management, depending on life circumstances at that point in time.
Traditionally when buying a SFH the wisdom is to not buy unless you plan to own the house for 5-10 years due to selling costs and equity gain from paying the loan. However, this doesn't factor in any forced appreciation or loan paydown from tenants.
So my question is - does this wisdom still hold when you're house hacking? If not, would the breakeven point come sooner or later? My intuition is that it would come sooner due to the appreciation and loan paydown.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y
Not sure where that "wisdom" regarding needing to own a property for 5-10 years to cover selling costs comes from. But you should ignore it.
I've bought and sold dozens of SFH's over the years and I only owned 1 of them for 5+ years.
If you buy right and add value through renovations, you can sell in 2-3 months and walk away with a healthy pay day. No need to wait 5-10 years.
My 2 cents here is to ignore any of these generic rules that you've heard of. Just underwrite the deal based on your objective and risk tolerance. If you're looking for cash flow, underwrite the deal based on whether or not it achieves the return you are looking for. If you're looking for a flip profit, underwrite the deal based on the ARV compared to the purchase price+rehab costs.
Fort Worth, TX · Member since 2020 · 1k+ posts · 2k+ votes
4y
The idea of househacking is to be able to change properties more quickly. Are you keeping each old property to rent out? If so, I'd say to hire a property manager if the property is still cashflowing and is a good deal, if not, 1031 exchange into something else possibly in your new area.
It wouldn't change. You don't want to be buying and selling a rental property every 5 years (unless you are flipping, but that is different). As Alicia said, renting out rooms while living there is a way to buy properties faster and keep your living costs down. Selling and buying costs and any money gained through appreciation can quickly disappear.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y
Not sure where that "wisdom" regarding needing to own a property for 5-10 years to cover selling costs comes from. But you should ignore it.
I've bought and sold dozens of SFH's over the years and I only owned 1 of them for 5+ years.
If you buy right and add value through renovations, you can sell in 2-3 months and walk away with a healthy pay day. No need to wait 5-10 years.
My 2 cents here is to ignore any of these generic rules that you've heard of. Just underwrite the deal based on your objective and risk tolerance. If you're looking for cash flow, underwrite the deal based on whether or not it achieves the return you are looking for. If you're looking for a flip profit, underwrite the deal based on the ARV compared to the purchase price+rehab costs.
Not sure where that "wisdom" regarding needing to own a property for 5-10 years to cover selling costs comes from. But you should ignore it.
I've bought and sold dozens of SFH's over the years and I only owned 1 of them for 5+ years.
If you buy right and add value through renovations, you can sell in 2-3 months and walk away with a healthy pay day. No need to wait 5-10 years.
My 2 cents here is to ignore any of these generic rules that you've heard of. Just underwrite the deal based on your objective and risk tolerance. If you're looking for cash flow, underwrite the deal based on whether or not it achieves the return you are looking for. If you're looking for a flip profit, underwrite the deal based on the ARV compared to the purchase price+rehab costs.
The idea of househacking is to be able to change properties more quickly. Are you keeping each old property to rent out? If so, I'd say to hire a property manager if the property is still cashflowing and is a good deal, if not, 1031 exchange into something else possibly in your new area.
That would be the idea! Hiring a property manager is definitely an option if I have the portfolio built. Good idea on the 1031 as well!
Not sure where that "wisdom" regarding needing to own a property for 5-10 years to cover selling costs comes from. But you should ignore it.
I've bought and sold dozens of SFH's over the years and I only owned 1 of them for 5+ years.
If you buy right and add value through renovations, you can sell in 2-3 months and walk away with a healthy pay day. No need to wait 5-10 years.
My 2 cents here is to ignore any of these generic rules that you've heard of. Just underwrite the deal based on your objective and risk tolerance. If you're looking for cash flow, underwrite the deal based on whether or not it achieves the return you are looking for. If you're looking for a flip profit, underwrite the deal based on the ARV compared to the purchase price+rehab costs.
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
4y
If you add value through renovations and live in the property for two years, you can sell it tax free...while collecting rent from roommates. Do a few live in flips like this and you can build a lot of wealth. You and your roommates will have to live through the rehab though...or, you'll need to knock it out up front.
Real Estate Agent · Southern California · Member since 2019 · 681 posts · 281 votes
4y
@Nate Hemby I would buy something that has enough bedrooms that when you move out you are making a decent % above your piti. Then you can role that into the next property rinse and repeat over the next 5 years!