All Forum Posts by: Leo R.

@Randall Re II last time I checked, America First Credit Union will do a HELOC on a rental property.

@Josh Yame the rent for the garage 1/1 ADU will often be a bit lower than a comparably-sized 1/1 apartment--but that's partly because apartments often offer additional amenities (like a pool, a gym, etc.)....and the house will be lower rent than a comparably sized house without an ADU (because tenants renting a house would rather have the property to themselves rather than have to share the property with someone living in the garage ADU).

...in a lot of ways, a house with a garage ADU is similar to a duplex--in terms of functionality, rents, tenant pool, etc.

...So, if the garage is 1/1 and the house is 3/2, I'd try to comp the rents to a duplexes with one 1/1 unit and one 3/2 unit--that will get you in the ballpark.

Regardless of the type of property, I like to be very conservative with my numbers; I'll often assume 15-20% lower rent than the market, and I factor in lots of vacancy. I'd much rather estimate too low and be pleasantly surprised than estimate too high and get hit with a nasty reality check...

Regarding the logistics of converting your garage: In some scenarios, garage conversions can be pretty easy and a great CoC return, in other scenarios they can be a real pain... ...first, check with the city to see if they allow garage conversions, and if so, what their requirements are for the permitting & approval process. Assuming the city allows it, here are a few things to consider:

-How easy is it to get the necessary electrical into the garage?

-How easy is it to plumb the garage? (e.g.; does the garage share a wet wall with the house? does the sewer main run under the garage or nearby?)

-How will the garage ADU be heated/cooled?

-How will getting rid of the garage affect the functionality and value of the property? (in some neighborhoods, a garage is a must-have for resale...in other neighborhoods, not so much)

-Once the garage is gone, where will tenants park?

-Is there an existing entryway that can be used for the ADU, or will you have to create a new one? What's the plan for the garage door? (will you just frame a new wall, will it be a huge sliding glass door, etc.?).

-If you're financing the ADU conversion, don't forget to factor that new debt service into your financial model...seems obvious, but a lot of folks forget to do this. ...regardless of how you're paying for the ADU, calculate your CoC return based on several rent projections (including "worst-case-scenario" rents).

Good luck out there!

@Andy T. what's the average monthly cashflow?  

(including the HELOC debt service, taxes, maintenance, property management, typical vacancy, and all other expenses).

...I'm not sure how anyone would have much energy left after a 65-70 hour workweek, let alone a 65-70hr work week doing construction....

@Pedro Garcia it depends on how you're using the property.

If it's a 2/1, and you're renting it to a single person or perhaps a young couple, then 1 bathroom might be fine. But ,if you're renting it to two housemates or a small family, then 1 bathroom might make it a lot less desirable.  As with any business, it's critical to know your customer, and to understand whether your product matches your customer's desires, needs, etc.

If you plan to sell the property, then yes--1 bathroom will certainly be worth less than 2+ bathrooms.

One middle-ground strategy is to buy a 1 bathroom house that has a floorplan and plumbing arrangement where it would be relatively easy and relatively inexpensive to add a 2nd bathroom, and then add that bathroom....I've done this before, and in my case it was very successful--it completely changed the tenant demand, produced a great CoC return from increased rent, and increased the value of the property. However, the key to the success was the fact that the house had a layout where adding the bathroom was relatively simple and straightforward (no need to deal with load-bearing walls, no significant re-routing of plumbing, electrical or HVAC, etc.--it was a simple operation. If it had been a more complex process, it might not have been worth the effort.)

Good luck out there!

@Preston Loveland I'm also in SLC, and I'm fairly familiar with Rose Park...your price seems reasonable for a 3/2  A to B+ unit in Rose Park, so I think there are probably other factors at play...

Since it's a 3 br, most potential tenants are probably families...and most families probably don't want to live above their landlord.

As @Nathan Gesner mentioned, 3/2 is tight for 1k sq ft (which would also turn off most families). Two parents and two kids (or even one parent and two kids) would be pretty cramped in 1k sq ft.

Then there's also the factor of seasonality--February is a tough time to find tenants.

Not allowing pets is a big thing in SLC (EVERYONE here has a dog)...I also generally don't allow pets, but it seriously reduces the pool...

It might be worthwhile re-thinking your target market and the functionality of the house...families will be turned off for the reasons mentioned above...  One option would be to rent it by the room to three young professionals (or even a couple)...if you rented it by the room to three people, you'd probably be able to get more than what you have it listed for...if you rented it to a young couple, you could probably still get 1600ish (market the extra bedrooms as an office for each of them).

Another option would be to re-configure the functionality of the house--turn it into a 2 bedroom 2 bath...if you did that, now instead of a cramped 3/2, you have a spacious 2/2 that would be great for a single parent with one kid, a young couple, or two housemates (each of whom would get their own bathroom, which is a huge selling point if you're renting to housemates)....the downside of this is the extra work, and also the fact that it could reduce the value of the property if you decide to sell...  

Good luck out there!

@Rhianna Cultrona you said "...in a C neighborhood but a good location"

Typically, a C neighborhood is a bad location by most standards (or at least, mediocre)...maybe you could clarify?

Whether to finance or go all cash depends on a lot of factors you haven't mentioned--like the price, the cashflow (both as a cash buy and as a financed purchase), the terms of the debt, how the cash purchase would affect your net worth and exposure to risk, your exit strategy, etc., etc.  What @Nathan Grabau mentioned is spot-on.....provide the forums with more detailed info about the deal, and we can provide you with more detailed feedback...

Good luck out there!

 @Seth Michael Carp I'm a college professor, and also a real estate investor with plenty of house hacking experience--so I see this issue from both sides.

It depends partly on what type of college you're going to--if it's a super rigorous, tough school, then your time will be tight. But even then, if you approach house hacking correctly, you may be able to manage both...

The amount of time the house hack will consume depends largely on the location, the type of property, and the type of tenants ...a C or D class property can completely overtake your life, and isn't advisable for a new investor (let alone a new investor starting college).  If it's a B or A property in a location that attracts plentiful highly qualified tenants, then that's more feasible...  Number of tenants will have an impact--one tenant is obviously much less time consuming than ten tenants. Type of tenant is critical--are you renting to party-animal 18 year olds who have no prior experience renting property, or are you renting to 28 year old doctoral students who have a track record of responsible tenancy? (the former will be exponentially more time consuming than the latter). It's also important to find a property that has a layout and features that work well for house hacking; check out this thread for some info about that: https://www.biggerpockets.com/...  

Starting college and doing your first house hack simultaneously would be a lot to manage, so it might be a good idea to live in student housing for year 1, and then decide whether to house hack for years 3-4. (During year 1, you'll learn how much time your college courses consume and you'll get your time management dialed-in, you'll network with other students who can be future tenants, you'll learn about which neighborhoods near your school attract the highest quality tenants, and you'll study up on house hacking and analyze countless properties). By the end of that process, you'll be much better prepared to pull the trigger on a house hack. Proper preparation prevents poor performance.

One issue you'll likely have to navigate is the balance of being a landlord vs. being a friend with your tenants...college students often (and understandably) want to be friends with their housemates...but, being friends with tenants causes problems (If you're actually operating as a landlord and enforcing the lease, they won't be your friends for long...and if you're trying to keep them as friends, you won't be a very effective landlord). When a tenant is late on rent, causes too much noise, damages the property, or violates the lease in some way, you'll have two options: 1. enforce the lease (which is being an effective landlord, but you'll probably lose the friendship), or 2. let it slide (which means you might keep the friendship, but you're not being an effective landlord)...it's a no-win situation. The simplest solution is to not be friends with the tenants (you can be friendly without being friends). Even better is to house hack a duplex, tri or quad so that your tenants are living in separate units from you--which will make it easier to not become friends with the tenants.

Although house hacking comes with challenges (just like anything else worth doing), I'm a HUGE proponent of house hacking--it's arguably THE best way to get started in REI. In addition to making money, house hacking can teach you all the fundamentals of REI--which are some of the most valuable lessons you'll ever learn!

Study up on house hacking and learn as much as possible about what does and does not work, and if it seems like the right choice, go for it.

Good luck out there!

@Matthew Beninate house hack a new place every 12 months.

It will teach you all the fundamentals of REI, but it's simpler and lower risk than more complex strategies like flipping.

There are plenty of folks who have built multi-million dollar net worths via repetitive house hacking.

Good luck out there!

@Levi Dobson yep--that's another consideration--the more shared walls you have, the more noise.

I've never tried to soundproof a wall; what did that involve, and how much did it cost?