All Forum Posts by: Benjamin Sulka

Acquiring an income earning property with high potential for appreciation for less than $20k out of pocket?  Sounds good to me.  If the alternative is wait 5 years for a down payment on something you don’t live in, you stand to likely gain substantially by moving on this decision now and collecting rent, principal pay down, appreciation, and tax benefits in those 5 years.  As long as your analysis is sound that is a decision that makes sense to me.  

@Benjamin Sulka I house hack a duplex and dont have anywhere near that amount of reserves. When we bought it I renovated the tenant side of the building and just factored in those costs right out of the gate and then wrote them off. I’ve secured a great long term tenant who lived with me in a different location prior to me purchasing this building about 4 years ago. I’ve had 0% vacancy, and don’t allocate for this because I know he’s going to stay for a long time to come. I’d think 4-5% would be sufficient for vacancy.

We mow our own lawn and the parking lot is usually plowed by the association that owns it. I have two deeded parking spots in the lot but owe 0% to the condo association that owns it through a stroke of luck. If we get a big snow storm my contractor comes and cleans up our two spaces as a curtesy.

If I were you I would lean towards properties with smaller landscaping issues if possible to minimize costs. I take the size of the yard into consideration with all my purchases.

Depending on the age and condition of the building you'll need more maintenance and CapEx. I still don't allow for more than 6% on CapEx with any of my purchases. I only rarely have maintenance issues and 5-6% seems enough for this.

That being said my average account has about $9,000 in it right now. I’ve got 7 properties and each month I generally add more money to each one.

My biggest expense possible barring some unforeseen disaster would be a new furnace for about $10,000. I’m working to eliminate those in most of my buildings through the Installation of propane heating systems.

I would think 25% would be more than sufficient in funds to keep you in business.

 The age of the properties is a misconception and doesn't always have a bearing on the condition of a home. A place can be completely gutted and remodeled, but because it wasn't torn down it still shows the original build date. For example, a house built in 1920 with new HVAC, new roof, and a new electrical panel might be a better buy than a house built in 1950 with original systems.

For the gardener services, why have a line item for it if you are handling it? Also, is it a good use of your time? Are there higher income producing activities that would be a better use and could make you more than what could be $25 a week to cut grass? For example if it takes you 30 minutes to cut the grass, how many deals could you have analyzed during that time to expand your portfolio? Your time is valuable. Only do it if it brings you joy, otherwise delegate. 

You know your market better than anyone else.

Regarding vacancy, check out comps on Zillow and when yo scroll down after the description, they give you a snapshot as to the activity. That will give you a sense of vacancy.

Every property is different so 10% for CapEx might be high or you can redo some of the major systems upfront in order to lower that percentage.

How much is a gardener there? Here in Los Angeles I pay $110/month. You could also look into doing drought tolerant/low maintenance landscaping to help with these bills. 

I'm going to tell you if you're too conservative, that's a great problem to have. I don't earmark %s, I keep that cash set aside from the get. Granted, I am coming from different means but that X% for a roof in 7-10 years doesn't wait for you-- it could come sooner.

So be conservative with this, and if you're wrong-- great. Don't stress that aspect.

I'd say what you really want to do is keep probably 75-100% of capex repairs set aside, 3-6 months of tenant turnover and 3-6 months of vacancies set aside. Everyone will say I'm too conservative, but most of these people on here can't weather a single month of vacancy and/or a true capex problem. I'd rather be safe than sorry.

@Brian Sardinskas GREAT POINTS again man!

I think self-management is more than doable with all the awesome property management software out there. For example, BP members already get access to RentRedi and Stessa. I personally use Avail for PM & Stessa for accounting/book keeping. Super user friendly for both. I spend probably hour managing my house hack per month. 

As far as lawn maintenance, you could be looking down the barrel of $200+ a month for basic lawn care. If you would rather pay that monthly to take a task off your plate, then go for it. If you have an hour every couple weeks to cut the grass, then just buy a mower like Brian mentioned. Maybe you can even take turns with your fiance haha (jk). 

I hope this extra bit of info helps! 

Hey @Benjamin Sulka

Good luck on your house hacking endeavors. I saw some of your previous posts, so I'm glad you're getting closer to your first.

I think your rent sounds pretty cheap between you and your fiance now, but I also don't know the COL in your area.

Maybe if you found something comparable in price or slightly less, then it could still math out, because you'll be benefiting from appreciation, loan amortization, and potentially a housing expense decrease over the long term even if slightly. 

Your numbers seem pretty conservative to me, especially your vacancy. That is close to 1 month vacancy every year. I feel like if you're paying a PM another 10%, I'd hope they weren't allowing almost a month vacant every year. With that being said, have you considered self-management as a house hacker. Even if you just do it in the short term, then maybe you'd save 10% there and be efficient enough to cut your vacancy % down to 5? (Food for thought)

10% for Cap Ex & 5% for maintenance sounds fair and consistent with many BP suggestions.

If it is value add and you do renovations, then hopefully your place will be "like new" and won't have many of those repairs/maintenance/cap ex issues early on. 

Ben, I hope some of these thoughts help your decision making process. If you have any questions, I'd be happy to share my experience or be a fly on the wall to bounce some ideas off of. 

You got this though! You sound like you're very educated and are ready to take action!

-Ant, fellow house hacker haha