First-Time Buyer in Atlanta: How Much House Should I Buy for a House Hack?

[Andrew Williams]

Hey everyone,
I'm moving out of my apartment soon and looking to buy my first house hack instead of signing another lease. My lease ends in a few months, and I want to make a smart move into homeownership.

I have a solid credit score, earn about $150K annually, and can put up to $40K down. I'm based in Atlanta, where true duplexes are hard to find, so I'm mainly looking at single-family homes with in-law suites or basement apartments that can be rented out.

My main question is around purchase price—should I go for a more affordable property to stay conservative, or stretch for a higher-priced home that could generate more rental income? I’d really appreciate any advice, especially from folks who’ve house hacked in similar markets.

Looking to buying more in the future as well. 

Thanks in advance!

[Berenger Greer]

Andrew, 

This is a great question, and something I actively do for clients and myself.

Getting into a solid B class market is what I believe will be your best bet, and where I have seen the most success. 

I sell, as well as manage, a good amount of house hacks in the Cobb County, Gwinnett County, and Cherokee county areas. 

400k OR LESS will be just fine, that'll land you a mortgage payment of about $2400-2500. 

The goal is to find something that will attract renters despite the hassle of living in a single family home that isn't set up to be a duplex. In order to avoid long vacancies it is best to adjust your rental price below market comps and and find a way to fairly split the utility bill. 

My typical approach, using a 2/1 as an example, is to lease about $200-$300 lower than others 2/1's and offer them no utility fees, or only $100 flat rate. It sounds like you'll be losing money, but if the upstairs is a 3/2 and you do the same, $200-$300 less than comps with $100 flat rate or no utilities, I should work out just fine. 

E.G. a home I sold in Kennesaw, $350k PP 20k cosmetic rehab including kitchenette addition, whole home with no utilities paid by owner would've leased about $2400. 

We leased out the top floor, 3/2, at $1800 with $100 utilities paid by tenants

Bottom 2/1 at $1300 with $100 utilities paid by tenants. Average utilities here is about $300 monthly for water electric and gass. 

You went from $2400 rent to $3000 total. 

It isn't an insane gain, but it is an extra $500-$600 a month when completely rented out, lets you capture two low risk long term tenants that are on legal leases, and push yourself to cashflowing despite 7% interest rates. 

I have done this over 100 times within the past 4 years and can tell you this is the main strategy I have found to actually work. 

Leasing both units at market price with full utilities covered will, in most cases, have the property sit vacant for months at a time. 

Alternatively, furnish your addition to the home, and list it to many private facebook groups, zillow may work, and furnished finders. 

What I do personally is buy 250-300k townhomes with basements in the smyrna area, turn it into a 3 unit with 2 1/1's and a studio on the main level with the kitchen, lease out each unit for $1000-$1200 a month $125 flat rate utility bill. 

You get amazing tenants who want to be in the area, and you win by getting an additional $1200 a month in rent, they win by leasing for a much much lower price than anything else in the area. 

I lived in these units myself, it is a bit weird at first, but you quickly get use to it. 

Let me know if you have any questions, 

Berenger