All Forum Posts by: Michael K Gallagher

@Jennifer Horowitz I was thinking about this more, and if that is your goal....to have a multifamily property basically when it is all rented out, be able to pay for itself and a single family home for you...Then you may want to be looking at Tri Plexes and Quads. I'm not sure what your market is, but here in Columbus OH, if you were going to find a deal to do it...you'd have more luck in those ranges. And if your are trying to put the least amount of money down to do it, then you can still get FHA loans up to 4 units.

Hey @Jennifer Horowitz if I am understanding correctly the mortgage on the Duplex would be more than the rental income do I understand that correctly? 

So the way I understand it is that the total gross rent on the duplex would be considered income, but the banks usually only take into account 75% of that income to account for vacancy and the like.  So What you would need to do is find a duplex where 75% of the gross rental income (either of both sides or the one side depending on if you house hack it or not) is more than the mortgage.  That way you have "income" form that property.  Now it will depend on the deal and the property of how much that income is, but yes if the income from the rental does not cover the mortgage then yes you'd have a negative Debt to Income Ratio.

The way it worked for us was that when we moved out of our duplex and got a single family but kept the duplex, because the duplex made money and cash flowed, the mortgage of the duplex basically did not count against us in our debt to income ratio, it was only the new single family we were looking at.  If you are looking for the duplex to generate enough income to not only pay for itself but make you enough money to then buy a single family....I'm not saying it can't work, it obviously can, At least in my market it would just take a really really good deal to make that happen.  But it's obviously possible.

Ok,

So my wife and I just bought a freshly flipped house (again) and I’ve been fixing a lot of really basic stuff, that isn’t a huge deal in the grand scheme of a project, but if I weren’t a decently handy person it would be a huge headache. And I realize that’s what a home warranty is for but I’ve also seen where a lot of home warranties don’t cover “improper installation” which is what all my issues are.

So my question is....would you as a flipper want to know when the people you sold to had these issues? Is it value added or just annoying?

The things are, master bath toilette leaks and I had to reseal it, master bath sink p trap leaks, and before you

Go bananas over “why didn’t you get an inspection” we did but theses issues came up after living in it. kitchen sink not installed with proper clips so the hose pops off...basically a bunch of “oh this little piece I’m left with probably doesn’t matter...”

Anyway, thanks and looking forward to the feedback!

I'll beat the same dead horse that is....if you can make the conventional work do it, its the better option, but if you can't there is nothing wrong at all with FHA, and it's a great tool to get into a House hack. Thats what we did. You can always refi later back to conventional.

I do all of the reading, the looking at deals, the analyzing, but the main reason that my wife and I are in a position to have a duplex and a single family is because of my wife. She is my REI secret weapon. So in order to hopefully help others engage their spouse or partner in REI...below are some key life events and how my wife, and partner, was so key to our success.

1) Bought out first house, sold our first house two years later for a large profit, because my wife works and has such a great income we were able to afford that first house in the burbs. 

2) house in the burbs appreciates in value in 2 years, we sell it, take that money, buy a duplex, house hack it, and drop our living expenses by more than 50%.  The only reason I could house hack the duplex was because my wife was ok enough with the idea of long term wealth and our future, that a couple years in a duplex was worth it to her. She didn't have to really understand or care about the fine details, all she needed to know and be ok with is that living in a duplex would let us cut costs and save more for the future.

3) I was able to start my on LLC. With our costs were so low, because of the house hack, and because my wife still has a great job, last year I was able to start my own LLC and take a risk that, had we not been living in a duplex, I would not have been able to take.

4) My wife literally bought the new house.  We just closed on a single family to be a primary residence, and because my wife has a great W2, and we have income from the duplex, she was able to buy our current home in her own name, and qualify for some credits because my income as a 1099 didn't count.  

Long story short, I would not be where I am currently in life without a key life partner who may not know anything about cash on cash returns, or the BRRRRR method, but she has been the most important part of the investing we've been able to do so far.

@Chris Parker this is fantastic I love the plan.  I recently read "the pumpkin Plan" and your idea strikes me as something along the lines of a "giant pumpkin" taken from the book.  It's specific, its niche, and it is repeatable and standard enough that you could build systems around it to scale it.  From a numbers point of view perhaps its worth establishing investment metrics, not only to purchase a property, or screen your leads in a way, but also as a performing asset.  If you are going to take this on you'll need to think about what does a successful SF rental look like as a performing investment for you, and then track each property based on those "success" metrics.  That way if at property number 50, you are finding that property number 15 that you bought really isn't performing that well, and you can adjust what you are doing there, or perhaps just sell it and take a small profit and run. 

Its one thing to "like the idea" of 100 single family rentals as a portfolio, and its another to successfully execute that portfolio, but you seem like a numbers person and I have no doubt that you'll just get more and more efficient the more of these you buy.  You'll develop relationships in the markets, and things will get easier and easier the more you buy...so it is a great strategy!  

Good luck!  

Hey @George Penree welcome! I am just moving out of my house hack in South of main in Columbus over on the east side. We lived in one side of our duplex and rented the other for 2 years up until about two weeks ago. If you have any questions about shopping for one or finding one I'd be happy to go over numbers and what we looked for. I'd also encourage you to consider the FHA loan option as its one of the cheapest down payments to get into a duplex!

I managed it myself and still manage it. I've mostly been using zillow rental manager and its been a really nice platform.  I'm also a pro member on bigger pockets and take advantage of all the OH legal documents we get access to, for sure worth it.

So again more than happy to talk specifics if you are looking at certain properties or areas...and share what my experience has been...but overall house hacking in general opened up so many other doors in my life, so I'm a huge fan and I'd say do it!  and do it sooner rather than later.  

Cheers, 

Michael 

Hi NA Col, 

Welcome.

1) I'd personally lean towards a cash out refi especially because interest rates are ridiculously low at the moment.

2) I'd focus your math and scenarios around how much, you mentioned student loans, can you comfortably pay off, and still have enough cash on hand to make another deal.  I'm assuming your student loan debt is probably north of 6% interest, and I follow the school of thought that if you can take some of your refi cash and get either the loans totally paid off, or close to nothing, thats a good first move to set you up long term.  Plus it goes towards your Debt to income ratio.

3) You mentioned passive income, so to me this means long term rentals.  Therefore I'd say instead of selling your current house, or the family's house, simply keep them as rentals.  You already have a 2 door portfolio.  

So the whole thing from a high view, If it were me me... cash out refinancing your properties to get at the cash, and not sell them.  Take that cash, pay down higher interest debt. Re-alocate the money you would normally spend on those loans into a savings account for future projects, or you can also take that payment and apply it to one of your houses principals.  From there I'd say to start looking for your next property and try to make it either a duplex you can house hack or another single family perhaps with a double master that is ideal for a house hack also.  You could focus on slightly outdated properties to get a better deal, and use some of your cash to rehab and force appreciate.  You mention above wanting to be able to "quit your day jobs" well if you can live for free or even make a little money through a house hack, that really gets you a lot closer to being financially free.  

Getting our duplex that we house hacked, really set me up in a lot of ways to be able to take some risks in other areas of my life that had I still been living in the single family in the burbs, I would not have been able to.  So I have nothing but good things to say about house hacking.

Cheers, 

Michael    

@Jennifer Horowitz My personal opinion would be to start with the Duplex.  By starting as an owner occupant, you can 1) really learn the ins and outs of land lording on a smaller scale, and 2) bring your living expenses to almost 0 hopefully.  

And if you can stick it out and live their for at least 2 years you can sell it and not owe tax on that income from the sale.  So that alone could be worth starting there, and then taking that capitol from the sale and putting it into other deals.  

Once you have a year of tax returns for the rent from the duplex you should have enough documentation to prove that income and go shopping for a single family. FHA vs conventional I think comes down to downpayment basically, If you have the 20% down its 99% better for the long term to go conventional, but if you don't the 3.5% FHA downpayment lets you get into that house hack sooner and get moving on it, and you can always refi later.

Good luck!

@Sammy Ismail I did not see it on your list, but my sister lives in a tri-plex in University heights, and the numbers on it I ran based off her rent and comps on the market currently were pretty impressive!  The only thing I found in my research was that the property taxes in that area were almost as much as the P&I, so that I was shocked by!  But the numbers still ran pretty well, considering triplexes and duplexes in that area are on the market for under 200K.  And rents are around 900-950 per unit.