All Forum Posts by: Jon McCarron

Hi @Darcy Dawe

My advice will probably mirror what other have said and will say. In my opinion house hacking is a great way to start. You can buy with a low down payment, have your living expenses either drastically reduced, or completely covered while you live there. You can take your monthly savings and build your financial position by either paying off debts, increasing your savings rate, or investing in other properties. You can buy a 2-4 unit building when you use low down payment financing. If you do a house hack a 4 unit building once every year or 2, then you can have 20-40 units over the next 10 years. 

I started off with a straight investment property (25% down payment), then house hacked my next two properties. I currently have 7 units over 3 buildings. I believe if that first one was a house hack that I would probably have been able to scale a lot faster than where I am today.

In the meantime, keep putting away cash, and continue to educate yourself with books, podcasts, and forums like the one on bigger pockets. 

Good luck on your journey!

Jon

Hi @Rebecca Tong

I would say if the hook ups are already in place, then I would allow them to install their own. In my area, you can get more prospects through the unit, and can get a higher rental amount. 

Hi @Nate Kovaly,

I agree with @Tom Wagner . You should answer those questions first. I would also ask what your real estate education is like. Do you feel comfortable running the numbers on a property? Have you been reading real estate books or listening to podcasts, or other forms of education? Personally, I took about a year of learning and then took the plunge. I was younger then and not so sure of myself investing, so I really made sure I understood the ins and outs.

If it were me starting over, I would invest in my home state by house hacking. You would be on site and can respond to anything that comes up. You can work on tenant screening and learn property management and business management. Your out of pocket expense should be dramatically reduced. You can buy a 2-4 unit property with low money down. With a house hack you can use your excess savings to invest in more real estate if you decide you wanted to pursue it at scale, pay down other debts, or just build up more savings/reserves/emergency fund. 

I am now on my second house hack, but my first property was a 3 family in Salem that I bought as a straight investment. If I had started with that first one as a house hack, there is no doubt in my mind that I would be further along on my wealth building journey.

Hope that helps in the perspective!

Jon

Hi @Katarina Bishop

Like everyone has said, be careful buying a property with your boy friend...you might end up getting married and buy more properties! It happened to me. I bought a 2-family house hack with my girlfriend in Beverly, MA on the North Shore. Then we got married. We closed on our second house hack in February in Salem, MA.

House hacking, in my opinion, doesn't need to cash flow from day 1. It NEEDS to drastically reduce your living expense to make any kind of sense. For example, my then girlfriend (now wife) and I were paying a combined $1850/month with our rents (She paid $1,100 and I pay $750). After we bought our 2 family, doing some rehab, raising rents, doing a refinance of our mortgage, we were each paying ~ $150/month out of pocket plus some in utlities, and gained over $200k in equity. We recently moved out and rent the second unit and clear $1,700 above our mortgage (which is not to be mistaken as all the expense of owning a rental).

A few tips, that some others have shared as well:

1) Try looking at 3 and 4 units buildings. Those have a better chance of cash flowing while you reside in the building.

2) 2 family that are larger in bed room size could also work for you if you are willing to live with roommates.

3) Value add properties will help build equity.

4) Have cash reserves when you are buying and keep adding until you have a good cash cushion.

5) If your property doesn't produce cash flow day one, then the big win is the money you are saving every month. Going back to my real life example: Going from $1850 (total rent we were paying) to total $300 out of pocket towards our mortgage, savings of $1550 every month! Use that excess cash to put towards bad debts, your next property, or other investments.

Sorry for the repeat information and advice. House Hacking does work and is very powerful! Good luck!

Jon

Good morning @H. Jack Miller

I am a buy and hold investor. I believe the area I am in (North of Boston) will increase in value over time. I am still dealing with a manageable portfolio of 7 units across 3 buildings. Maybe I will trade up in the future. For now, these, plus any other properties I purchase, will continue to make up the vast majority of my wealth, and the cash flow is good for the immediate term. Also, you can take out loans against the properties to buy more, and not incur a capital gains tax (as the IRS code is right now). 

Hi @Melinda Ching

I would give plenty of notice of an increase (2 months before the current lease ends is fine). That way if they decide to not renew, you will have time to get prepared to look for new renters. It happens sometimes. If you don't want to lose them, you could try a small raise. Is the apartment at current market rates? There are a lot of people looking for apartments, so you could probably fill it quickly. Also, if they are currently paying below market rents, then they may want to stay in place (even with a rent raise) if they can't get a deal else where.

Is there any way to separate the utilities? Paying for all of those utilities seems like it would definitely affect your house hacking numbers. It might be worth it to see if you can separate any or all of the utilities (they will only go up if you decide to move out and rent the other unit).

Good luck!

Jon

hi @Peter Carboni

I hope your multi-family house hack search is under way, or you are under agreement on a property. I know your original message said you didn't know the North Shore, so you are looking else where. But, if you did consider expanding the search area, I like to buy in Salem and Beverly on the north shore. Fun little cities, rents are increasing, good commuter cities with Salem having it's own train station, and Beverly having 5 (maybe 4, one might have got closed down). Good access to Rt 128/95. Multiple colleges (Salem State University, Endicott College, Montserrat Art College, and Gordon College) in the area that add to the tenant mix. I just put a tenant in one of my apartments who graduated from Endicott College and said that she never wants to leave Beverly/Northshore. Anecdotally, they are desirable areas long term for young people. 

There are beaches in both towns and surrounding towns, and both have very nice down town areas.

I own 2 buildings in Salem, one of which I am currently house hacking. I own a 3rd property in Beverly, that my wife and I house hacked for 3 years, and now will make great positive cash flow. So, depending on your goals and your budget, those north shore towns could be good to check out too.

Good luck in the search!

HI @Nico Dandini

I think it is case by case for every individual.  I look at 2 numbers: The amount of money I am either saving or making by living in one of the units, and what will the gross rents look like against monthly expenses and financing. 

For example (quick numbers): if your rent is $1200/month, and you have the chance to purchase a multi and come out of pocket only $400/ month, I would say that is a very solid house hack. Here, you are saving $800/month, which you could apply to your next property, pay off bad debts, or build up cash for other investments.  

The next number would be what the gross rents produce against expenses and financing. Can the rents either keep you afloat or produce positive cash flow.

If your strategy is to build up your portfolio over time, buying a house hack every year or 2 is a great way to do it. They will all most likely be base hits, but that's how you will win the ball game. Finding prospects that have value add opportunities will help out and build equity quicker. I'm on my second house hack in Salem, MA. The first house my wife and I house hacked in Beverly, MA will make around $1800/month over our financing, and that $1800 for the most part will go into reserves until that is padded. Then we will put the rest to work in other deals or other investments.

Also, for everyone else reading this, if you are looking for a personal trainer, talk to @Nico Dandini !

Have a nice day!

Jon

@Cameron Iarrobino

Amateur historian connecting dots, I bet a lot of towns and cities had explosive population growth in those decades. So, the need for housing was immense, and scaling the housing market was needed. So, multi-family housing provided the supply to house people. 

That is my guess.

I think today, it is all economics. Developers and builders need to make money. Luxury homes, condo buildings, and larger apartment buildings are a better way to make money of initial sale, or in the case of the apartment buildings, make a decent ROI.

Katelin Roche with Rubenstein and Associates. They are in Framingham, so just outside of Worcester County. But still good!