Hi everyone, I thought it might be helpful to share a few house hack case studies from the past few months where my clients have closed. Property #1 - 2-flat with 4 beds/2 baths in Unit 1 (duplex down) and 2 beds/1 bath in Unit 2. Pro forma rent $3000 for Unit 1 and $1600 for Unit 2 Location: North Austin, just a few blocks from Cicero and North Ave Purchase Price $429,900 Seller credit $12,600 Earnest money: $4,200 FHA financing 3.5% down payment Cash due at closing $3623.75 Projected cash flow once fully rented (even with property management) $450/mo Notes: $12,600 seller credit was built into the offer upfront. Overall turnkey but my client will likely boost rents by installing in-unit laundry. Property #2 - Legal 2-flat with non-conforming basement unit. Unit 1 has 3 beds/1 bath, Unit 2 has 4 beds/1 bath, and basement has 2 beds/1 bath. Pro forma rents - Unit 1: $1890; Unit 2: $1750; Basement: $1000. Location: Brighton Park, right by Pershing and California Purchase Price $475,000 Seller credit $14,000 Earnest money $4,700 FHA financing 3.5% down payment Cash due at closing $12,639.89 Projected cash flow once fully rented $109/mo Notes: $11,500 seller credit built into the offer upfront but buyer received an additional $2500 to address catch basin repairs. Property #3 - Legal 3-flat. Unit 1 has 2 beds/1 bath, Unit 2 has 1 bed/1 bath, Unit 3 has 3 beds/1 bath. Pro forma rents - Unit 1: $1300; Unit 2: $1100; Unit 3: $1600 Location: Marshall Square, right by 23rd and Sacramento Purchase Price $355,800 Seller credit $10,674 Earnest money $3,600 Conventional financing 5% down payment Cash due at closing $15,824.69 Projected cash flow once fully rented $216/mo Notes: $15k concession from seller between purchase reduction plus seller credit for buyer to repair the garage, which will cost about $25k. This was a multiple offer situation and it sold for $30k over the asking price.

All of the above. Besides being a point of contact, a property manager is best. You want to deflect any and all areas of liability. Just being exposed is the most basic issue, but beyond that being in constant contact let alone living with/near them is enough to define it as "greater" liability.

What are the risks of self-managing? If you're saying house hacking as a family with children can limit your privacy or be less desirable than owning a detached single family home, I don't disagree. However, many families rent or owner-occupy apartments in 2-4 unit buildings, condos, or townhomes. House hacking is essentially the same situation with the exception of the owner/landlord aspect to it. For me, I would rank house hacking as a more desirable situation than any of the above I laid out. What are these material risks you're alluding to? Setting the age limit for self-managing or house hacking at 25-28 seems pretty arbitrary as well. Many people are now delaying buying homes or starting families until later in life (30s or even 40s+).

It can be a concern at times and is a conversation to be had with the buyer and listing agent that under-appraising is a possibility. I lean on the comps for supporting evidence and that helps me advise what's a realistic appraised value.

Where does house hacking still work in Chicago?

Caleb Brown

Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes

1y

Each look like great properties to start off with

1 Reply

Jonathan KlemmBusiness Member

Moderator

Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes

1y

Love seeing your success as a Chicago broker @Paul De Luca! Each one of those seems to offer your clients an amazing start into the investor space!

Having an agent like you, who has done it before, makes all the difference in your client's success.

Were there any key challenges in these deals that created some good lessons learned?

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Paul De Luca

OP

Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes

1y

Thanks @Jonathan Klemm!

Key challenges in these deals included strategizing how to win a multiple offer situation (#3) and negotiating concessions (#3) which we did in that case thanks to your team's estimate.

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

1y

How do you get them to appraise?

[email protected]248-209-6824

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Paul De Luca
OP
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
1y
Quote from @Drew Sygit:

How do you get them to appraise?

How do you mean?
0 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
1y
Quote from @Paul De Luca:

Quote from @Drew Sygit:

How do you get them to appraise?

How do you mean?

Can't just arbitraly inflate the price for seller contributions and such
Still needs to appraise out for the mortgage.
[email protected]248-209-6824
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Paul De Luca
OP
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
1y
Quote from @Drew Sygit:

Quote from @Paul De Luca:

Quote from @Drew Sygit:

How do you get them to appraise?

How do you mean?

Can't just arbitraly inflate the price for seller contributions and such
Still needs to appraise out for the mortgage.
It can be a concern at times and is a conversation to be had with the buyer and listing agent that under-appraising is a possibility. I lean on the comps for supporting evidence and that helps me advise what's a realistic appraised value.
1 Reply

Aaron ZimmermanBusiness Member

Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes

1y

Thanks for sharing Paul and for sharing some cash flow stories even in todays market!

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V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

1y

The risks of self managing and disrupting family/independence just isn't worth the material risk for anyone over 25, maybe 28 years old.

House hacking is the low hanging fruit to get in. But people never explain those aforementioned risks.

Think most of us want to find properties that exhibit intrinsic valuation or aren't terribly deep OTM and show vast extrinsic applied to it. That's really showing something if you can get that. This is just kind of expected and can be done anywhere, pay the least down, get the most rooms then rent each room.

Still likely overpaying for the property once you consider it's at market, and if you had to use a DSCR or a normal conventional way you would not qualify.

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Paul De Luca
OP
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
1y
Quote from @V.G Jason:

The risks of self managing and disrupting family/independence just isn't worth the material risk for anyone over 25, maybe 28 years old.
House hacking is the low hanging fruit to get in. But people never explain those aforementioned risks.
Think most of us want to find properties that exhibit intrinsic valuation or aren't terribly deep OTM and show vast extrinsic applied to it. That's really showing something if you can get that. This is just kind of expected and can be done anywhere, pay the least down, get the most rooms then rent each room.
Still likely overpaying for the property once you consider it's at market, and if you had to use a DSCR or a normal conventional way you would not qualify.

What are the risks of self-managing? If you're saying house hacking as a family with children can limit your privacy or be less desirable than owning a detached single family home, I don't disagree. However, many families rent or owner-occupy apartments in 2-4 unit buildings, condos, or townhomes. House hacking is essentially the same situation with the exception of the owner/landlord aspect to it. For me, I would rank house hacking as a more desirable situation than any of the above I laid out. What are these material risks you're alluding to?
Setting the age limit for self-managing or house hacking at 25-28 seems pretty arbitrary as well. Many people are now delaying buying homes or starting families until later in life (30s or even 40s+).
1 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
Quote from @Paul De Luca:

Quote from @V.G Jason:

The risks of self managing and disrupting family/independence just isn't worth the material risk for anyone over 25, maybe 28 years old.
House hacking is the low hanging fruit to get in. But people never explain those aforementioned risks.
Think most of us want to find properties that exhibit intrinsic valuation or aren't terribly deep OTM and show vast extrinsic applied to it. That's really showing something if you can get that. This is just kind of expected and can be done anywhere, pay the least down, get the most rooms then rent each room.
Still likely overpaying for the property once you consider it's at market, and if you had to use a DSCR or a normal conventional way you would not qualify.

What are the risks of self-managing? If you're saying house hacking as a family with children can limit your privacy or be less desirable than owning a detached single family home, I don't disagree. However, many families rent or owner-occupy apartments in 2-4 unit buildings, condos, or townhomes. House hacking is essentially the same situation with the exception of the owner/landlord aspect to it. For me, I would rank house hacking as a more desirable situation than any of the above I laid out. What are these material risks you're alluding to?
Setting the age limit for self-managing or house hacking at 25-28 seems pretty arbitrary as well. Many people are now delaying buying homes or starting families until later in life (30s or even 40s+).
It's arbitrary, because if it was a priority it'd get done sooner. Instead they commit to stuff like "house hacking" and dealing with the pain of it instead of focusing on family formation.

What risks are there for self managing? The grandest of them all... liability. This is why most RE agents shouldn't be giving advice, they never see the blind spots.

0 Reply
Paul De Luca
OP
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
1y
Quote from @V.G Jason:

Quote from @Paul De Luca:

Quote from @V.G Jason:

The risks of self managing and disrupting family/independence just isn't worth the material risk for anyone over 25, maybe 28 years old.
House hacking is the low hanging fruit to get in. But people never explain those aforementioned risks.
Think most of us want to find properties that exhibit intrinsic valuation or aren't terribly deep OTM and show vast extrinsic applied to it. That's really showing something if you can get that. This is just kind of expected and can be done anywhere, pay the least down, get the most rooms then rent each room.
Still likely overpaying for the property once you consider it's at market, and if you had to use a DSCR or a normal conventional way you would not qualify.

What are the risks of self-managing? If you're saying house hacking as a family with children can limit your privacy or be less desirable than owning a detached single family home, I don't disagree. However, many families rent or owner-occupy apartments in 2-4 unit buildings, condos, or townhomes. House hacking is essentially the same situation with the exception of the owner/landlord aspect to it. For me, I would rank house hacking as a more desirable situation than any of the above I laid out. What are these material risks you're alluding to?
Setting the age limit for self-managing or house hacking at 25-28 seems pretty arbitrary as well. Many people are now delaying buying homes or starting families until later in life (30s or even 40s+).
It's arbitrary, because if it was a priority it'd get done sooner. Instead they commit to stuff like "house hacking" and dealing with the pain of it instead of focusing on family formation.

What risks are there for self managing? The grandest of them all... liability. This is why most RE agents shouldn't be giving advice, they never see the blind spots.

Do you have any specific examples of greater liability when self-managing?
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
Quote from @Paul De Luca:

Quote from @V.G Jason:

Quote from @Paul De Luca:

Quote from @V.G Jason:

The risks of self managing and disrupting family/independence just isn't worth the material risk for anyone over 25, maybe 28 years old.
House hacking is the low hanging fruit to get in. But people never explain those aforementioned risks.
Think most of us want to find properties that exhibit intrinsic valuation or aren't terribly deep OTM and show vast extrinsic applied to it. That's really showing something if you can get that. This is just kind of expected and can be done anywhere, pay the least down, get the most rooms then rent each room.
Still likely overpaying for the property once you consider it's at market, and if you had to use a DSCR or a normal conventional way you would not qualify.

What are the risks of self-managing? If you're saying house hacking as a family with children can limit your privacy or be less desirable than owning a detached single family home, I don't disagree. However, many families rent or owner-occupy apartments in 2-4 unit buildings, condos, or townhomes. House hacking is essentially the same situation with the exception of the owner/landlord aspect to it. For me, I would rank house hacking as a more desirable situation than any of the above I laid out. What are these material risks you're alluding to?
Setting the age limit for self-managing or house hacking at 25-28 seems pretty arbitrary as well. Many people are now delaying buying homes or starting families until later in life (30s or even 40s+).
It's arbitrary, because if it was a priority it'd get done sooner. Instead they commit to stuff like "house hacking" and dealing with the pain of it instead of focusing on family formation.

What risks are there for self managing? The grandest of them all... liability. This is why most RE agents shouldn't be giving advice, they never see the blind spots.

Do you have any specific examples of greater liability when self-managing?

Do you need examples? Or do you not understand what you're asking?
0 Reply
Paul De Luca
OP
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
1y
Quote from @V.G Jason:

Quote from @Paul De Luca:

Quote from @V.G Jason:

Quote from @Paul De Luca:

Quote from @V.G Jason:

The risks of self managing and disrupting family/independence just isn't worth the material risk for anyone over 25, maybe 28 years old.
House hacking is the low hanging fruit to get in. But people never explain those aforementioned risks.
Think most of us want to find properties that exhibit intrinsic valuation or aren't terribly deep OTM and show vast extrinsic applied to it. That's really showing something if you can get that. This is just kind of expected and can be done anywhere, pay the least down, get the most rooms then rent each room.
Still likely overpaying for the property once you consider it's at market, and if you had to use a DSCR or a normal conventional way you would not qualify.

What are the risks of self-managing? If you're saying house hacking as a family with children can limit your privacy or be less desirable than owning a detached single family home, I don't disagree. However, many families rent or owner-occupy apartments in 2-4 unit buildings, condos, or townhomes. House hacking is essentially the same situation with the exception of the owner/landlord aspect to it. For me, I would rank house hacking as a more desirable situation than any of the above I laid out. What are these material risks you're alluding to?
Setting the age limit for self-managing or house hacking at 25-28 seems pretty arbitrary as well. Many people are now delaying buying homes or starting families until later in life (30s or even 40s+).
It's arbitrary, because if it was a priority it'd get done sooner. Instead they commit to stuff like "house hacking" and dealing with the pain of it instead of focusing on family formation.

What risks are there for self managing? The grandest of them all... liability. This is why most RE agents shouldn't be giving advice, they never see the blind spots.

Do you have any specific examples of greater liability when self-managing?

Do you need examples? Or do you not understand what you're asking?

Yes, that's why I asked.

Are you talking about only self-managing while you live in the property or are you talking about self-managing any properties in general, whether owner-occupied or not?
0 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
Quote from @Paul De Luca:

Quote from @V.G Jason:

Quote from @Paul De Luca:

Quote from @V.G Jason:

Quote from @Paul De Luca:

Quote from @V.G Jason:

The risks of self managing and disrupting family/independence just isn't worth the material risk for anyone over 25, maybe 28 years old.
House hacking is the low hanging fruit to get in. But people never explain those aforementioned risks.
Think most of us want to find properties that exhibit intrinsic valuation or aren't terribly deep OTM and show vast extrinsic applied to it. That's really showing something if you can get that. This is just kind of expected and can be done anywhere, pay the least down, get the most rooms then rent each room.
Still likely overpaying for the property once you consider it's at market, and if you had to use a DSCR or a normal conventional way you would not qualify.

What are the risks of self-managing? If you're saying house hacking as a family with children can limit your privacy or be less desirable than owning a detached single family home, I don't disagree. However, many families rent or owner-occupy apartments in 2-4 unit buildings, condos, or townhomes. House hacking is essentially the same situation with the exception of the owner/landlord aspect to it. For me, I would rank house hacking as a more desirable situation than any of the above I laid out. What are these material risks you're alluding to?
Setting the age limit for self-managing or house hacking at 25-28 seems pretty arbitrary as well. Many people are now delaying buying homes or starting families until later in life (30s or even 40s+).
It's arbitrary, because if it was a priority it'd get done sooner. Instead they commit to stuff like "house hacking" and dealing with the pain of it instead of focusing on family formation.

What risks are there for self managing? The grandest of them all... liability. This is why most RE agents shouldn't be giving advice, they never see the blind spots.

Do you have any specific examples of greater liability when self-managing?

Do you need examples? Or do you not understand what you're asking?

Yes, that's why I asked.

Are you talking about only self-managing while you live in the property or are you talking about self-managing any properties in general, whether owner-occupied or not?

All of the above. Besides being a point of contact, a property manager is best. You want to deflect any and all areas of liability.
Just being exposed is the most basic issue, but beyond that being in constant contact let alone living with/near them is enough to define it as "greater" liability.
3 Reply

Henry Lazerow

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

1y

Awesome post. Brighton Park is a great market. You can also still house hack and cash flow on the more desirable parts of north side such as Avondale, Logan, Albany, etc. but usually needs to be 4 unit, some 3s for the numbers to work. I have a lot of clients surprised when I show them comps of ARV rents to work into their numbers.

1 Reply

Jonathan KlemmBusiness Member

Moderator

Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes

1y

@V.G Jason - Which specific disturbances are you talking about with house hacking?

I feel that age is somewhat irrelevant because some people may be trying to improve their families by house hacking.

There are a ton of great options, at least here in Chicago, to buy a multi-family where a family could live comfortably.

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Where does house hacking still work in Chicago?

Where does house hacking still work in Chicago?

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