All Forum Posts by: Daniel Haberkost

@Jon Westover you wouldn't happen to be in CO would you? I have a lender here who will accept them as long as they're all standard, long term leases.

How many lenders have you called?

"Under normal circumstances, I would absolutely NOT consider them."

I think that line answers your question. The financial risk of this not working out is much more severe than another month or two of vacancy. In my opinion, you'd be taking a bet that's unevenly weighted in the negative direction. 

@Joel Bullock @Jerry Stevenson id be happy to email it to both of you, just shoot me a message on here with your email and I’ll send it over!

@Jun Wang we just finished up a rehab and 1 week in the furnace died!

These things happen, in the long run everything will regress to the mean. Don’t get too emotionally involved, keep cash reserves and (assuming you bought right) it will work out in the end.

@Dustin Sanders assuming it’s cash flow positive, I’d prefer 1 $300k house.

Positives can be looked at as negatives and vice versa. Many people say you’re reducing your risk by having 2 sources of income as opposed to 1, okay, sure. On the flip side you’re doubling the chance of getting a bad tenant, you have 2 furnaces that could die in the middle of winter, twice as much to manage, etc.

There is no right or wrong answer, it depends on your situation. I want high end real estate in great areas, I don’t want $150k houses. I’m more concerned with long term wealth than immediate cash flow.

Wanted to include my thoughts as it seems most of the responses are unanimously for 2 houses instead of 1 because everyone likes to repeat the old rationalization for a duplex over a single family without realizing the obvious drawbacks.

Again, I’m spending in general and don’t know the specific numbers of the two options. If the $300k house is negative every month and the $150k both cash flow that’s a different story. If that’s not the case then look at your goals and financial situation and decide accordingly.

-Dan

I've been house hacking in CO for several years and I have an auto renewing month-to-month lease (which I got from someone who house hacked in CO for years before myself) and that has worked just fine. Do you have to have a traditional 12 month lease? 

My tenants have stayed long term, regardless of the lease.  

@Steven Johnson I don't have any insight into your market specifically so I'll have to defer to someone else on that BUT I do have feedback on the general question of investing when people think we're about to have  crash. 

I frequently hear investors complain that there are no deals and that they wish it was 2008 and there were cheap properties everywhere. However, in 2008 nearly everyone was saying real estate was a doomed asset and finding lenders was extremely challenging. Point being, if you can't invest (in a good deal) now then you're most likely not going to when the market does crash. 

Find an undervalued property, add value to it further so you have a significant spread between mortgage/value and keep conservative amounts of liquidity on hand. That's it. 

I was in the middle of a BRRRR when Covid hit, it was a good deal so it didn't matter. I've continued to make offers through the entire thing because my numbers are conservative and I have a cautious amount of liquidity.

Maybe the market will crash tomorrow, doesn't really matter. I'm looking at a long holding period (sounds like you are too) so as long as I continue to be conservative and hedge against total loss I will keep making offers. I'll reiterate that I know nothing about your local market, but assuming it's not getting completely decimated, you should probably be doing the same. 

-Dan

@Jeffery Smith the city has changed quite a bit since you previously lived here! We're approaching half a million people and all kinds of businesses are moving in. As a result, you're going to face enormous competition no matter what asset class you go after. The market here is nuts, which is true all over the country, but even more so locally. 

However, deals can still be found. Occasionally there will be wholesale properties that have a decent margin but most of the time they're bid to absurd prices. Since you have a decade of experience working with investors I would imagine you have some experience going direct to seller? That's your best bet. You're also unlikely to find a deal, you're going to have to make it by solving a problem of some kind or being creative. 

All that being said, the lack of inventory has a positive side to it in that finding tenants is extremely easy, you'll get solid rents and have little-no vacancy. 

CO Springs is a very cool place to live and lots of people (like me) who (unfortunately) were from the Midwest see what it's like here and move. That, coupled with the businesses moving here, makes me very bullish on The Springs in the long run. 

-Dan

Post it on Craigslist, call everyone you know in the investment world and see if anyone they know is buying there, (if you have Prop Stream or a similar software) look for recent cash sales in the area (non owner occupied) and call the buyers to see if they are still buying. Go on FB and join wholesaling groups, many of them will have posts where people sent their deal out and cash buyers gave their contact info & you can typically post your deal. 

Aside from that, do you have cash buyers for that market already?

Worst case scenario, you could probably partner with a wholesaler there on it. 

@Casey Helmick

That’s cool, what city ?

And gotcha, you could start by flipping houses, but that’s fairly risky and it’s quite a challenge in our current environment to buy low enough to make the numbers work.

I would highly recommend house hacking as it’s a great first step into RE. It’s easier to manage tenants as you’re right there living next to them and eliminating your housing expense drastically increases your savings rate which makes deal #2 come much quicker!

Here in CO Springs there’s a huge demand for room rentals and I know Denver is the same way which also makes house hacking work really well.

Have you considered that option ?