All Forum Posts by: Miller McSwain

@Sara Capra
If you you are considering rent by the room (like @Dan Guenther mentioned) and have questions, let me know! I just wrote the book on Co-Living for BP which comes out in the Spring. Always happy to chat about the strategy!

Long story short, it makes a lot of income (2-3x long-term rental income) when done right! Definitely a lot more management than a long-term rental though.

Also, I live in Colorado Springs 😉

 Thanks for the shoutout!

I have 6 Co-Living properties (41 rooms) in Colorado Springs.

Insurance:
I've been seeing insurance companies start to offer Co-Living specific products that are very expensive (2x-3x normal cost). If you have a good insurance broker, you should be able to use a more standard policy though. My broker shopped around and found 3 companies that allowed us to add Co-Living clauses (SafeCo, Auto Owners, and Travelers). So the premium is still the same cost as usual and we are covered.

Refinance:
I've only had 1 experience so far with an appraiser coming to the property after a Co-Living remodel. In that case, she comp'd it assuming it didn't have the extra bedrooms and then just gave us a $3k boost for each room we built (2). I don't think this is normal though. I've heard of either:
1. Taking the doors off of the rooms when the appraiser comes so that they aren't rooms. Instead they are "flex spaces" or "offices".
2. Tearing down any rooms that are a little wonky before the appraisal.

For example, I bought a HUGE (3300 sqft) 3 bed house. I turned it into a 7 bed house.
2 of the new rooms are super useful to an end buyer and would bring us to a total of 5 (which would comp very well). If we decide to refi in 3-5 years, though, we may time a couple of the leases to end at the same time and spend ~$6k to tear 2 rooms down and rebuild them. Totally not efficient, but its something we may have to do. If it allows us to pull $100k+ of equity out, then it was well worth it though.

Does anyone know of any active wholesalers in Colorado Springs? I'd love to get in touch with them!

🚀Thanks!!!

 Thanks for having me Chris! I always love providing value to the front range investors!!!!

Some rent-by-room managment tips we implemented that make things SO much easier:
1. Replace bedroom knobs and front door knob with electonic locks. This way we can easily set new pins for new tenants, don't have to call locksmiths, can create pins for handymen/cleaners, etc
2. Hire a house cleaner to clean shared spaces (we do this monthly). Although we have good tenants, some clean more than others. Having a cleaner just prevents some of potential issues from occuring between roommates.
3. Provide shared supplies. We supply anything that is shared (toilet paper for shared bathrooms, trash bags, dish soap, etc) so that tenants don't have to worry about whose turn it is to purchase supplies.

The best free skip trace service I've found is truepeoplesearch.com
You have to manually enter each address though, so if you are looking to gather data on a large list, then you probably want to use a paid service. The paid service I've used is leadsherpa.com

True People should get you started for free though!

Totally agree with @Ryan Thomson

When you think about those numbers, don't forget to think about occupancy/vacancy. If you start short-terming it again, you will have non-neglible vacancy. So compare that to the situation you have now where the tenant is renting for months at a time.

Good luck 😀

YES! There are smart locks that you can remotely set pins for that DON'T use wifi! I was confused by how this could work when we first bought them, but I understand it now and they DO work!

We are using the "rent-by-room" strategy, and we put electronic locks on all bedroom doors and the front door. Our locks allow us to remotely add a pin for a new resident, make temporary pins for handymen/contractors, etc.

We looked for any lock that uses the "TTlock" app on Amazon. That way, all of our locks are in the same app and have the same functionality.

For exterior deadbolt locks (front door, garage door), we used this:
https://a.co/d/2SFMNcy

For normal interior locks (bedroom), we used something like this (the ones we have are currently unavailable, but this has similar capabilities):
https://a.co/d/8C6nYen

You can create codes from anywhere without the locks having internet connection because it can create them using an offline algorithm. So basically, you just go on the app and select an option for permant/time-bound key. And then it gives you a 8 digit code, that the lock's offline algorithm is aware of, that will unlock it!

I'd offer a slightly different perspective. My wife and I are in our early 20's and recently moved across the country and started our HH journey.

Since we were young, like you, we decided to look all across the US and find where we WANTED TO LIVE. House-hacking is a strategy that can work anywhere (although it is better in some areas), so I'd encourage you to find where you would enjoy living first. In our case, we moved from Tennessee to Colorado because of the lifestyle that Colorado offers (skiing, hiking, beauty, beer, etc).

Once you select a state, then you can start looking for a city that will best support your house-hack. This depends on a couple of things:
1. Your budget. In our case, Denver and many other markets in Colorado were simply too expensive for us to qualify for
2. Your strategy. As a house-hacker, you have some options for how to utilize your house: Medium-term-rental, short-term-rental, or rent-by-room rental. Each will lend better to certain cities. For example, short-term works very well in vacation markets and can work in metro markets; medium-term works best in metro markets with hospitals; rent-by-room works best in markets with lots of young professionals or military.

In our case, we wanted to use the rent-by-room strategy, so we selected Colorado Springs because of the young professional/military presence and because we could qualify for the houses.

Then you will want to start analyzing properties in that market to ensure that you can hit the metrics you want, get connected with an agent (investor friendly) to start discussions about the market, and get connected with a lender to verify what you can be pre-approved for!

There are many ways to approach this problem; however, 1 way to look at it is from an analysis perspective.

Note: The response below assumes that you have positive cash flow regardless of the down payment size
If you run a property through the BP Calculator, you will see that your CASH FLOW increases as you put more money down. This is because your largest expense, the mortgage payment, decreases as your down payment increases.

On the other hand, as you put more money down, your CASH ON CASH (CoC) return decreases. The CoC is just a fraction with the annual cash flow in the numerator and your total investment in the denominator. So as you increase your down payment, the numerator increases (good) while the denominator increases (bad). The problem is that the denmoniator (your investment) increases substantially more than your numerator (your cash flow).

In summary, you can think of CoC as "bang for your buck". It is the amount of cash flow you make for each dollar you invest. So this is why I strive to maximize CoC, not cash flow. And this is why I'd opt for putting less down.

If your goals are different, that could lead you down a different route though.