All Forum Posts by: Jeff White

@Trevor Toft  Your expenses seem way too high for a townhome unless it has a lot of deferred maintenance, I don't think it will be that high, it is great to be conservative, but the 50% rule doesn't apply to all rentals, especially in HCOL areas like Denver. 

For example, if you rent is $4k per month, do you really think you need 50% for expenses or $2k per month, maybe it is a beatup property, but you are probably not getting $4k per month on a junk property. 

The 50% rule works better in midwest markets where houses sell for $100k and rent for $1k per month.  

Also, your debt structure is your asset more than the property, I wouldn't sell it, I would keep it as a rental, and maybe use a HELOC on it to tap into some equity, and then go another primary residence.

After buying another primary residence, I would re-evaluate every year or two to see how you can better maximize the returns. 

@Jonathan Baptiste It is too difficult to bill back people with rent by room style of house hacking, you will be unable to make it "fair" for everyone since some people take more showers than others, some people cook more than others, so how would you bill back those renters, or if one renter is gone for two weeks visiting family?  

The easiest way is to take the rolling average of the utilities for the last 12 months, and then include it in future rents for your roommate tenants, that will keep it simple and fair. 

Also, most utility companies can provide you the 12 month averages. 

@James Heiberg Welcome to the forums James, you are in a great place!

It is challenging to cash flow in the market today with high interest rates, high purchase prices and properties that don't "on paper" cash flow.

What you need to do is think a little more creatively, if you really want to cash flow, you need to consider alternative strategies besides just renting to a long-term market tenant since that is extremely difficult to cash flow.

Instead, you will have to consider utilizing short-term, mid-term and even Section 8 strategies. 

For example, Section 8 is a fantastic strategy where the local housing authority pays above market rents by bedroom count. Thus, you just need to find a investment property that has the right price and bedroom count and you will know exactly what rent you will get. 

It really is that simple, but most landlords don't consider the strategy because it isn't as sexy as Airbnb or renting to travel nurses. Nothing wrong with those strategies but those require additional capital to furnish it nicely, and with Section 8, you don't have to furnish it, and you will achieve higher than market rents. 

For the right investor, it is a win-win situation. 

Best of luck, it is still possible to cash flow, the only difference is being flexible with alternative strategies. 

@Dylan Greytak I'm a big proponent of Section 8 housing for a good strategy for landlords, I think it can be a valuable tenant base, you just have to screen them just as any other tenants. There are horror stories for that tenant class, but I feel like it is market dependent.  

Ex. $2,100 Fair Market Rents in Tampa, the Tampa Housing Authority covers $1,800 and the tenant pays $300 per month, you screen off the $300 per month for your rent to income ratio.

Also, you can definitely go off the Fair Market Rents that the 2nd poster mentioned above me, those are accurate but assume that number INCLUDES all utilities, so if you take out Electric/Gas or other utilities, they Housing Authority will reduce it down, so instead of paying $2,100 total, they will reduce it down to $1,950 if you want the tenant to pay electric/gas as an example. Sometimes, you can get the full $2,100 and have the tenant put the energy bill in their name.

Not every housing authority is the same, I would do more research and talk to more people at the particular housing authority you are looking at. Sometimes, they are very receptive to landlords and answering questions and other times, they are not. 

Also, I recommend getting everything in writing, so confirm in writing from the housing authority that they will pay $2,100 per month if you accept a particular Section 8 voucher holder for your vacant unit. 

It really depends, as you know in Denver, we don't have extreme summers like places such as Phoenix, so AC isn't necessarily as requirement for sure, basically you really need it in the summer months. 

If you already have a furnace with vents, then adding central AC would be the cheaper option than minisplits. Also, portable AC units and window units jack up your utility bill in the summer, and those can sometimes fry the outlets since they draw a ton of power compared to central AC. 

Since you are located in a premium area, I would definitely recommend adding AC to your single family, it is worth the extra cost vs. fixing the swamp cooler. 

I have a good HVAC guy that can definitely help you. Not sure if you need a full upgrade on your panel.  Feel free to DM me.

@Jonathan Baptiste I'm sorry you are going through this right now. The big thing I've learned over the last few years doing the rent by room strategy, you can't change the people. You can set the expectations up front, that's helped me a lot with finding, screening, and getting the best fit for the house with other like-minded individuals that respect the house and each other.

Also, another insurance policy is to give every roommate-tenant a 2-4 month lease to start as sort of a trial period to see how they fit in with the house, and if they aren't a fit, you can choose to not renew them and then replace them with someone that is a fit. If they are a fit, then you can offer renewals for another 6-12 months.  

By doing that, you will find the best group of people, and then, a majority of your problems will go away since they will have passed your 2-4 month lease test. 

@Brett Dickerson Reach out to Tshetter Sulzer, they can help you.  So sorry that your are going through this. 

@Dainmeyen Brown  The answer is with house hacking, your goal for the first year that you live there should be to reduce or eliminate your living costs, you won't necessary cash flow your first year because you are still renting out the other units but taking one unit yourself. Example, lets say you pay $1,500 in rent for a 1 bedroom in your market, and if you bought a 4 unit, and rented out the other 3 units, lets say you paid $500 after all expenses, that's a $1,000 per month savings from your one bedroom apartment, I would call that a win for a majority of house hacks where you want privacy with other units.  

If that's the main goal, and if you can accomplish that goal, you are setting yourself up for becoming a successful investor because with house hacking you get great benefits:

1) Learn how to be a property manager on-site

2) Reduce or eliminate or living costs

3) Can repeat house hacking as many times as you want

4) House hacking also allows you to purchase with lower down-payment options for primary residence loans that investment property loans

House hacking is great but you have to analyze it two ways - while living there and after moving out. Cash flow is more important after moving out than while living there, that should be the goal. 

@Adam Gusky Hi Adam, congrats on starting the process of going through pre-approval. I've seen as low as 6.25% recently with my clients, so that's probably the best that you will get at the moment, are you looking to buy in the next 1-3 months? 

If so, that's great news because you will be able to negotiate seller credits and other seller incentives to buy a house since the market is more favorable for buyers in the winter months in Denver. 

@Radoslaw Wlodarczyk Good morning!  One Rental at a Time is one of my favorite books and also YouTube channel. I'm a big fan of Zuber. Anyways, you are correct, nothing will cash flow if you look at interest rates and also buying just single families with 20% down payments with current rates and market rents as an investment property. 

It really depends on your goals, are you trying to buy investment properties?  A new primary?  Are you open to house hacking? Do you want cash flow?  Do you want more appreciation? Are you open to creative strategies? 

Congrats on taking the first step, usually people get hung up on only one strategy, and the best way to start your real estate investing journey is house hacking with lower down payments and interest rate since it is a new primary residence, especially since you can probably rent out your primary and cash flow when you move out.

I'm a local investor and realtor here in Denver metro, and I've found success with house hacking here in Denver for myself (rent by room, Airbnb, Section 8, LTRs, etc) along with my clients too. It is that powerful of strategy that speeds up your time towards financial independence much faster than any other strategy!

Currently, there are a few ways to house hack in the Denver metro area and still live for free depending on your level of comfort.

1) Rent by Room - personally, my favorite strategy, you buy a large house, live in one room, and rent out the other rooms. This strategy is very effective, especially on houses with lots of parking and houses with lots of bedrooms and bathrooms in areas near the popular locations around town.

Realistically, you can get $750-900 per room that shares a bathroom, and $900-1100 per room that has a private bathroom. If you do the math, when you get to 6+ bedroom houses, the numbers work out better with living for free and also cash flowing while living there. My last two clients closed on houses that became 8 bedrooms rent by room house hacks that cash flow, so it is possible in this market.

2) STR - Short-term rentals or Airbnb. This strategy is great, but it fluctuates depending on the time of year, you probably won't live for free because it is more challenging since you are only Airbnbing a small space or basement unit.

3) MTR - this is a good in between style of creative strategies since you can furnish a place nicely that would rent out on Airbnb but you want a long-term high quality tenant like a travel nurse or corporate rental that stay for 2-3 months vs. under 30 days for most Airbnbs.

Combining strategies is the best way to go, ideally, you would find a house with a separate entrance or walkout basement, live upstairs in the one of the bedrooms, rent out the other upstairs rooms and STR/MTR/LTR the bottom unit. You get the best of both worlds, and would easily live for free and probably cash flow, even with a 7% interest rate.

Personally, I don't recommend starting with properties with HOAs since HOAs can restrict your ability to house hack it with different strategies, and they can even restrict your lease from being under one year.

Hope this helps! I'm very passionate about house hacking, and I think it is the best strategy for any investor just starting out from college since you have the flexibility. Let me know if you would like to connect, it is a great time to buy in Q4 2023/Q1 2024 since your competition isn't nearly as intense, and you can get a better deal now than you will in Q2-Q3 2024.