New Investor Looking to House Hack and BRRRR!

Investor · Seattle, WA · Member since 2019 · 23 posts · 11 votes

Hi everyone, my name is Kirsten and I am beginning my journey into investing! I am looking to do my first house hack in the Seattle area (specifically purchasing a single family property and renting out the other 3 rooms) and then BRRR out of state where prices are cheaper.

For anyone who has done long distance investing, did you find that it was easier start with a house hack in your home market and then jump into the out of state market? Or did you jump straight into it? I ask because I originally felt that I needed to house hack closer to home in order to have some experience under my belt when talking with hard money lenders, however this is just an assumption so I would love to hear from anyone who has done it!

Thanks in advance!

Kirsten

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Michael HaasBusiness Member

Real Estate Agent · Redmond, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 724 posts · 3k+ votes

As @Neil Henderson mentioned, your experience BRRRRing out of state will be highly dependent on your team, especially the Contractor. I know plenty of folks with 7 BRRRR's under their belt locally get hosed on their first BRRRR out of state. I'd say two things:

1. Househacking is an absolute no-brainer in my opinion. There are few reasons I can think of for NOT househacking, the main two being you don't understand how the math works and just don't know how good househacking numbers are, or you value your privacy to the tune of $20,000 a year or more. Remember, if you househack an SFH with ADU or a Duplex it really isn't different than living in an apartment complex or town-home with neighbors that share a wall, so even that privacy argument is a little flimsy.

2. Unless you're buying through a turnkey company (where a lot of the work and due-diligence is done for you) I think buying and/or selling a primary residence in your home state is the absolute minimum experience I'd recommend before venturing out of state. If you were a friend asking me for advice I'd tell you that I'd really rather see 3+ deals locally before venturing OOS.

Remember - you can buy house-hacks for 1-3% down if your income is below DPA (down payment assistance) program thresholds, or 5% down if it is not. If you can afford a $100,000 property OOS, that means you can likely afford a $500,000 - $1,000,000 house-hack. Although you shouldn't count on appreciation as a rule, when it does happen (and it almost always does) you'll be happy that you sprung for the $500,000 property rather than the $100,000 one with the same downpayment.

[email protected]408-439-7873

HouseHack Seattle | Michael Haas & Team572 Reviews

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Daniel Haberkost
Rental Property Investor · Colorado Springs, CO · Member since 2018 · 682 posts · 729 votes
6y
Originally posted by @Kirsten Crotts:
Hi everyone, my name is Kirsten and I am beginning my journey into investing! I am looking to do my first house hack in the Seattle area (specifically purchasing a single family property and renting out the other 3 rooms) and then BRRR out of state where prices are cheaper.
For anyone who has done long distance investing, did you find that it was easier start with a house hack in your home market and then jump into the out of state market? Or did you jump straight into it? I ask because I originally felt that I needed to house hack closer to home in order to have some experience under my belt when talking with hard money lenders, however this is just an assumption so I would love to hear from anyone who has done it!
Thanks in advance!
Kirsten

I do own a duplex out of state, but that's it, so I will refrain from commenting on how easy/hard out of state investing is.
But I really wanted to chime in on house hacking, what would be the downside of starting with a house hack? It's an easy (relative to other options) start to real estate investing and it dramatically improves your savings rate while giving you quite a bit of freedom since your living expense is eliminated.
There are certainly people who have started with out of state investing and have been successful. But house hacking is very simple and accelerates your ability to get to deal #2 dramatically.
So I'd think that would be the logical place to start but that's just my opinion.
-Dan
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Kirsten Crotts
OP
Investor · Seattle, WA · Member since 2019 · 23 posts · 11 votes
6y
@Daniel Haberkost Those were my thoughts as well. Thank you for your reply!
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Eric James
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
6y
There are threads on the risks of OOS investing. BRRR OOS is probably the riskiest. Buying turnkey a bit less so.
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Neil Henderson
Specialist · Carolina Beach, NC · Member since 2016 · 390 posts · 496 votes
6y
We started with a house hack doing a short term rental from an auxilary dwelling unit on the front of our primary residence. This, plus fortunate market appreciation, allowed us to use that equity to purchase a couple of BRRRR properties out of state. Yes, there are challenges and risks. The key is having a rock star contractor you can trust, a good property manager, and boots on the ground who know the area.
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Michael HaasBusiness Member
Real Estate Agent · Redmond, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 724 posts · 3k+ votes
6y
As @Neil Henderson mentioned, your experience BRRRRing out of state will be highly dependent on your team, especially the Contractor. I know plenty of folks with 7 BRRRR's under their belt locally get hosed on their first BRRRR out of state. I'd say two things:

1. Househacking is an absolute no-brainer in my opinion. There are few reasons I can think of for NOT househacking, the main two being you don't understand how the math works and just don't know how good househacking numbers are, or you value your privacy to the tune of $20,000 a year or more. Remember, if you househack an SFH with ADU or a Duplex it really isn't different than living in an apartment complex or town-home with neighbors that share a wall, so even that privacy argument is a little flimsy.

2. Unless you're buying through a turnkey company (where a lot of the work and due-diligence is done for you) I think buying and/or selling a primary residence in your home state is the absolute minimum experience I'd recommend before venturing out of state. If you were a friend asking me for advice I'd tell you that I'd really rather see 3+ deals locally before venturing OOS.

Remember - you can buy house-hacks for 1-3% down if your income is below DPA (down payment assistance) program thresholds, or 5% down if it is not. If you can afford a $100,000 property OOS, that means you can likely afford a $500,000 - $1,000,000 house-hack. Although you shouldn't count on appreciation as a rule, when it does happen (and it almost always does) you'll be happy that you sprung for the $500,000 property rather than the $100,000 one with the same downpayment.
[email protected]408-439-7873
HouseHack Seattle | Michael Haas & Team572 Reviews
Website View Page
4 Reply
Jake Alger
Real Estate Broker · Bellevue, WA · Member since 2017 · 172 posts · 107 votes
6y
Hi @Kirsten Crotts,
In our market house hacking is something that's becoming more and more prevalent as the prices continue to increase. I've worked with quite a few clients this year who's plan was exactly that. Purchase a home, rent the rooms to keep expenses low, all while gaining 100% of the appreciation (whether forced or market) because their name is the only one on the property. It's a great way to keep your monthly living expenses lower and allow you to use those saved funds for other expenses or investments. Down the road, you can use the property to leverage into other investments as well.
BRRR is a different strategy and unless you have someone that can check in on the progress of the rehab portion, it can be very difficult. That's property why when talking to lenders they've given you a "stay local" vibe. Contractors are notorious for blowing timelines and budgets, and it gets far worse when the client can't keep them on task. Hard to do from hundreds or thousands of miles away.
Hope that helps :)
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Kirsten Crotts
OP
Investor · Seattle, WA · Member since 2019 · 23 posts · 11 votes
6y
@Michael Haas thanks for the great advice! I've been working on mastering the numbers and learning how to find a great deal vs. what is not. Continuing to look at properties within a commutable distance to Seattle/Bellevue as I do have to be in the cities a few days a week for work.

@Jake Alger I definitely agree on your points. One of the reasons I want to start with a house hack first is to, obviously, decrease rent expenses but also to buy a rehab and learn how to manage contractors and deadlines locally prior to moving OOS. Appreciate all the help!
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