All Forum Posts by: Julien Jeannot

I like the way you are thinking: long term.

That's how I play my numbers, I don't look for "best" or "Unicorns", but for base hit properties that fit my long term strategy.

If it works with a rehab bump in rent, YOY rent increases, and conservative appreciation then I go for it.

Don't forget about the the principle paydown and tax advantages in the math.

Also, the attractive properties on market get a lot of competition and I've rarely if ever heard an investor say "I should have not bought this property." What I hear is: looking back, I think I overpaid, but I should have bought every single one like it 5 years ago.

I cashed flowed on my first ouse hack BUT....

1. I was negative cash for a few years (still less then paying market rent)

2. I rehabbed then raised rents... still negative

3. I kept raising rents every year THEN I cash flowed living in one unit

4. Metrics? ... those are great for analysis paralysis. Figure out what your goal is, then attached the relevant metrics to it. Cash on Cash and ROI are great metrics for syndicators or RE agents selling you their products. I generally don't recommend getting bogged down on those metrics for house hackers.

My goal was to:

1. Find a safe place to live within commuting distance from work, garage, 2bed, 1+ bad, 1,000 sqft, and a yard.

2. Not to rent and start taking advantage of: principal pay down, tax benefits, YOY appreciation, and subsidized house via a tenant paying me rent

3. Fund a cosmetic fixer upper.

By all the recommended year 1 metrics, I failed. However, my results over the long term was 2x equity and $1,500/mo positive cash flow. Was it the "best" ... probably not and I don't care. It was a base hit that allowed me to start my journey and eventually exit the corporate world. 

I'd start by having a chat with a lender if you are not sure about the details around loan products.

A good lender familiar with house hacking will take your unique situation and provide options.

Mark,

I'm a numbers & history guy so that's where I tend lean.

1. Cash flow. Play the numbers out and see where they come out. Big mortgage, but also big income. Its actually safer because if you lose your job, the other units are paying part of the mortgage as opposed to you renting or owning a SFR. I also had nice corporate salary when I made the jump with lots of angst, but its best to jump into the unknown. It is a calculated risk, but a lot safer then keeping the money in the bank or in stocks in my opinion. Rates, I stopped looking at the rates a long time ago. I date them and as long as I'm comfortable with the number, I pull the trigger.

2. So what? Prices have always bounced back a lot better than your 401k. Again play the numbers out over the investment time horizon which should be long term 5+ years. I've got friends who check in with me 2x a year asking if now is the time to buy, if the sky is about to fall... 10yrs later they haven't bough a thing, and I've accumulated 10 units and retired from the corporate world. 

3. Looks like? I'd recommend firming up your numbers, go talk to the a broker lender and real estate agent. If you need help running numbers, there is no shortage of tools or folks who would be happy to help out. 

But honestly, start with the goal in mind and working your way backwards to your current situation helps cut through the noise. Couple things to consider:

- Do you want to be active or passive?

- Build wealth or cash flow?

- Do you like be able to check on your place ofter or not? In/out state sort of thing.
I've tried a fair amount of strategies and settled on the build equity first, then reposition to cash flow on a portfolio I could keep my eyes on.

- Do you need a place to live?

@Michael Smythies

The biggest lesson is the wild and ever changing landlord tenant laws.

To your area of interest:

- Tenant relations: Keep it business, stick to the lease agreement, communicate, and the golden rule. Be honest they'll figure out you are owner eventually, after all the information is public, best to start the relationship on solid ground.

- Maintenance & Repairs: act quickly on any request, use the opportunity to upgrade, set expectations for the common areas. Figures out a lot of my tenants are quite handy and more then happy to upgrade the place on their own with fair compensation. Win - win all around.

1) I'd first get to know my local laws. In my area (Seattle) there are a lot of state and city laws which dictate how much notice to provide and under which conditions. I'd start there.

2) Given the short runway of your lease, check to see what the lease defaults to.

3) M2M for me is a math exercise. Raise is as much as you need to cover higher possible turnover and the risk of a vacancy in the slow winter months.

4) If you have strategy, stick to it.

Follow the lease and be sure to follow the local procedures to a T. If this turns into a an eviction, not following proper procedures can reset the clock.

For me real estate is long term game. I've heard plenty of folks preaching short term scaling, but have not seen it done w/ out a lot of cash to back up the acquisition, spending 40hrs/week searching for deals, or another type of resource.

It's a math game.

- Target monthly cash flow / # of properties at $x cash flow * downpayment per property = required cash to reach goal.

- Lets say you are cash flowing $200/mo, that gives you $2,400 a year. You'll never achieve your goals short term by cash flow alone even if you raise rents 10%/year.

-However, 10% YOY appreciation on a leveraged property will results in much faster wealth build which can translate into buying more properties faster. Ex: $550k * 10% = $55k. If you need 20% down for the next property, then that takes you 1/2 way there. 

-There is usually a balance and trade off between appreciation and cash flow market.

-You could mitigate the cash flow issue in appreciating markets with higher downpayments or a Short Term Rental strategy.

I've been a Financing and Accounting professional until I transitioned full time full time REI. I've recently been pulled into consulting as a part time (fractional) CFO and found I enjoy it quite a bit and would not mind exploring opportunities in the REI space. I've found that I can make a tremendous impact on a small business with very fews hours of work.

Curious to hear from those who are building real estate companies: 

- Do you have a CFO or have you leveraged part time CFOs in your company?

- What were your needs?

- How have those services benefited to you company?

Hey Stace,
I find that starting with the goal and working your way backwards to your current situation helps cut through the noise. Couple things to consider:

- Do you want to be active or passive?

- Build wealth or cash flow?

- Do you like be able to check on your place ofter or not? In/out state sort of thing.
I've tried a fair amount of strategies and settled on the build equity first, then reposition to cash flow on a portfolio I could keep my eyes on.

That left me with: invest in high appreciating areas with solid rent growth in my home Market of Seattle. The strategy has to be long term 5+ years of hold time. The pros are I've been able to 2x equity and started to cash flow nicely yr 2 or 3. The Con is a bigger down payment and slim to no cash flow early on. I could have done better on the cash flow yr 1 &2, but that would have required a heavier invested in time & $ to source properties.