All Forum Posts by: Benjamin Sulka

Quote from @Benjamin Sulka:

Hey BP, 

I'm in the market to buy my first multifamily house hack within the next few months. I got pre-approved for $300k but I'm having a lot of trouble finding properties. 

Nothing on-market makes sense as expected. But even at my ideal purchase price, I'm having trouble making the numbers work. I'm taking the most conservative percentages for all of my monthly reserves but I'm not budging on these because I'll never skimp on my numbers to make something work. 

House hacking makes sense to me as long as I'm paying less than I would renting while I'm living there. The problem that I'm having is that I can't get anything even close to breaking even AFTER I move out. 

Would love to hear from anyone's personal experiences on how to navigate this. Should I further expand the radius that I'm looking? I'm trying to stay within 25-30 mins of Cleveland due to work considerations. 

Thanks for any comments!
 

-Ben, aspiring multifamily house hacker 

 Then put more money down.  With rates today you will not break even when you move out on any low money down program.

This is why people that keep preaching house hacking need to realize that it does not work like the yesteryears. You need to something different; put down 10% but closer to 15%. Live there for 3-7 years, then move out.

This isn't be 95% leveraged @ 7% and it'll be intrinsic in 12 months. Just doesn't work that way anymore. You need a new playbook.

Tons of good advice here. My only addition comes from Warren buffett, and I think this is even on the signs that Jimmy John's: if you are not willing to own it for 10 years, don't own it for 10 minutes." Especially in real estate, there are situations where you might own something for a short period of time, but I think the main point of this statement is to make sure that you buy right in a way that is consistent with your end goal. Don't budge. Go off market. There's always a deal to be had somewhere.

The point above about house hacking when you're highly leveraged being a more long-run game makes sense to me.  Given the recent inflation in real estate prices, a 5-year window for the house hack might be more reasonable, if you can stay that long.

This strategy mostly works in one of three ways:

1. You buy a dump ("value-add"), live in the worst side, rent out the nice side, fix up your side so you can then rent it at market rates;

2. You stay there long enough for rising rents and appreciation to make it make sense to move and do it again;

3. You bring enough cash into the deal that you still earn a reasonable, steady return when you move out.

For most people - the ones who have to "house hack" in the first place, they're going to be aiming for one or two here. If you bought cheap enough, three might be a possibility but unlikely. What you want to do is supercharge this thing and move out in a year and do it all over again. That's going to be tough in a high price, higher interest marketplace. Real estate is not a get rich quick scheme. If you really want to do that, you're going to have to really beat the bushes to find your next deal, and the one after that, etc. 

@Benjamin Sulka If i'm understanding you correctly, you are not liking the numbers of a duplex after you move out and have to rent both sides.

I obviously don't know your numbers or what you are accounting for but if the building is generally newer and in better condition it is ok to dial back the capex and repairs budget in my mind.

Additionally we pulled the trigger on our house hack really without considering what would happen when we left.  Perhaps this was short sided, but the real benefit to us was that it cut our living costs by almost 50%.  so really I didn't care what it looked like after I left, because the immediate benefit to my personal finances and wealth happened while I was living there.

Two years later we had an opportunity to move to another area of town that came up unexpectedly and at that point I ran the numbers and the rent appreciations made it easy for us to make that move.  

Just as you talked about "not skimping on your numbers" to make something work, you can also be inflating your numbers to make it not work out of fear or who knows.  But the power of a house hack is not from the cashflow after you leave, its in the immediate reduction of living costs you get while living there and the incredibly low down payment options you can use.  

If your having issues getting a duplex to work have you tried a 4 unit?  more units mean more income and generally not 2X the price.

Quote from @Benjamin Sulka:

Hey BP, 

I'm in the market to buy my first multifamily house hack within the next few months. I got pre-approved for $300k but I'm having a lot of trouble finding properties. 

Nothing on-market makes sense as expected. But even at my ideal purchase price, I'm having trouble making the numbers work. I'm taking the most conservative percentages for all of my monthly reserves but I'm not budging on these because I'll never skimp on my numbers to make something work. 

House hacking makes sense to me as long as I'm paying less than I would renting while I'm living there. The problem that I'm having is that I can't get anything even close to breaking even AFTER I move out. 

Would love to hear from anyone's personal experiences on how to navigate this. Should I further expand the radius that I'm looking? I'm trying to stay within 25-30 mins of Cleveland due to work considerations. 

Thanks for any comments!
 

-Ben, aspiring multifamily house hacker 

Welcome to what real estate is historically like. Not meant to be sassy but the last five years of real estate were a joke with ability to make money. Real estate historically has been a long term play. I saw a chart the other day on the 4% appreciation curve of real estate and how we are slightly above that, but that is more or less where real estate falls into. When paying 6-8% in closing costs real estate will not be profitable after the first year and is typically not profitable for the first five years. This is why you are seeing your numbers not really work. 

The solution is try and find a deal off market or time. Hold periods need to be adjusted. 

You need to be more creative to make your numbers work if you are buying on the MLS. Rent one side of the home by the room, STR, MTR, build an additional room to increase rent, store an RV in the backyard, etc. These will all increase cashflow, but will require more management by you.

It's very difficult to find home runs with current rates and prices. As others said, it isn't a bad thing to be cashflow negative for a year or two while rents continue rising. You still get principal paydown, tax benefits, and appreciation. Just be calculated and make sure you don't strangle yourself.

Otherwise buying off market will be your best option, but buyer beware and you need some more money to take over a decent sub-to deal or utilize a hard money lender. My recent sub-to deal blows my Househack MLS deal out of the water. Keep us updated! Big progress seeing you are prequalified.

Similar to what @Sarita Scherpereel says, a house hack will mostly be about the equity you make and total return after moving in low down as well as hopefully lower cost of living while you are owner occupying it. You can get cashflow up by doing cosmetic updates and atleast here in Chicago the 4 units tend to have the highest rent to purchase ratios so those are what I guide clients who want cashflow towards. The rents also go up with inflation while the mortgage stays the same, this can help as a nice kicker if do owner occupy it for a few years your cashflow will likely be a bit higher on the exit but depends how long plan to actually stay. 

Quote from @Benjamin Sulka:

Hey BP, 

I'm in the market to buy my first multifamily house hack within the next few months. I got pre-approved for $300k but I'm having a lot of trouble finding properties. 

Nothing on-market makes sense as expected. But even at my ideal purchase price, I'm having trouble making the numbers work. I'm taking the most conservative percentages for all of my monthly reserves but I'm not budging on these because I'll never skimp on my numbers to make something work. 

House hacking makes sense to me as long as I'm paying less than I would renting while I'm living there. The problem that I'm having is that I can't get anything even close to breaking even AFTER I move out. 

Would love to hear from anyone's personal experiences on how to navigate this. Should I further expand the radius that I'm looking? I'm trying to stay within 25-30 mins of Cleveland due to work considerations. 

Thanks for any comments!
 

-Ben, aspiring multifamily house hacker 

Why MUST you move out after 1 year? I know you want to buy another and start leveraging, but as long as you are paying less than you would for rent, save the difference and wait for an investment opportunity. It may take two or three years to find the right "next place."

For my first House Hack, I added value as I lived there so was able to get the property a little bit cheaper and start to get higher rents upon moving out. I still recommend buying in a nicer area since its once of few times you can buy a nicer multifamily with such little money out of pocket. @Benjamin Sulka