All Forum Posts by: Aaron Montague

@Craciun George with the apartment that you are talking about, no.

The general theory of house hacking is to reduce your personal costs while acquiring properties.

Example: Reduce your rent from $200/month

Buy a 2 bedroom apartment that costs you $300/month.  Rent out the other room for $150-200.  Now you are paying $50-100 less per month.  The issue is that you need to be saving money for eventual repairs and such as well.

How about AirBNB for your example above?  Then you could put 2 beds in the other room and treat the property like a hostel.  I have no idea how much money you could make in your area but AirBNB might have some statistics for your city/town.

Example 2: Reduce your rent from $200/month Version 2

Buy a 4 bedroom place that costs you $500/month.  Rent out the other rooms for $150-200/month.  Ideally you could live for free and put some extra money in your pocket.  Remember you still need to account for repairs and such.

@Kahim Sturgis Issues, maybe.  I'm not sure 1 year will fix your mother's credit issues unless her scores are already headed up.

The major issue I see if picking the wrong house for the right reason.  Treat the property as an investment first, everything else second. Don't buy the place because your mother, your first tenant, likes it.  UNLESS you have choices and the numbers work out.

Does your mom need to move in there?  

Will your mom pay market rent while she is there?

I would find something that makes sense as an investment first, THEN see if your mom wants to live there.

Do you need your grandmother there to co-sign for your mother?

My 1br units were usually easy to rent though hard to keep people in long term.  I averaged 14 months across the 2 1br units I owned.

@Nicole Flakes What do the numbers tell you?  Are you accounting for 8.1% vacancy?  8.1% is 1 empty month per year per apartment.  

How do you fill your apartments?  If you are paying a realtor on top of vacancy, then make sure that is accounted for.

@Jantsen Locke Start by talking to the current owners to see if you can get a deal.  You'll save yourself a LOT of time if neither place wants to do owner financing.  Approach them with a deal and see what they say.

Once you have the deal in place I recommend you use a lawyer and/or title company to prepare the deal for you, at least for your first few.

Never take it personally, ever.

Hi @Rob Zarrella, welcome to BP.  Write up that business plan, find your deals and start the negotiations from your side with your investors.  All plans have an entry and several exit points.  If it doesn't exist on paper, it doesn't exist.

Start with friends and family.  You have a level of trust there.  If you do start their be triply clear how they are going to get their money back.  Are you guaranteeing their money?  I.e. if your friend invests $25k with you, are you going to pay them back at least $25k no matter what happens with the RE deal?  If so, then they should get a much lower % of the deal as the risk is minimal for them.

My advice is to find a deal and start talking to people that you think have money to invest.   If they don't, ask them for someone that might.  Build your network, ask Realtors, and keep track of these people.  RE has zillions of facets, you never know which connection might take you down a totally different path than you expected.

@Ben Guttman So the strategy for @Rena Barron getting insurance today would be to check with the local agents?  Then the follow up strategy would be to call the same agent after the repairs had been made for a better rate?

@Corey Kenney this certainly sounds like an interesting project.  Put some numbers down and bring it back to the forum.  BP is a great place to bounce your ideas and plans around to see what people think of them.

A deal like this has TONs of possibilities and lots of risk.  Start with the basic numbers:

It will cost me $800,000 to have rental ready apartments.  I can get 4 apartments each renting for $1400/month in the building.  4 x $1400 = $5600/month in gross rents... STOP.  Not even close to the 1% rule, move on to the next deal.

Totally different story if the $800k investment brings 8 or 10 or 14 apartments online.  Once you figure out it is worth your time, then dive deep into the details.

Maybe it is actually a flip deal :)

I'll always defer to the industry insider :)  Ben - What would help our OP move the business from "hairy" to "non hairy?" 

The main reason I recommend that people use the local number is that they may want to move in the future.  If folks are getting 10% in your area use 10%.  Even if you plan on managing all your properties yourself, get the business used to paying out that 10% on the books.  

You won't miss out on any deals using the 10% number because you are the person that decides if the deal works for you at the end of the day :)  Accounting doesn't care where you put the numbers, the profit/loss at the bottom of the sheet remains the same.  You can use your 8% number if you know that you will manage the properties for the KNOWN duration of the investment.

Example:

Building 1: Rent is $1000, Profit (other than PM) is $400. You intend to buy and hold for the long term. Use 10% here and have Nathan's Building 1 Inc pay Nathan's PMing, LLC $100/month. This means that your overall business, Nathan's Long Term Retirement Inc still makes $400/month. Here you might move a long distance away and not be able to manage the property. Now that 10% needs to go to Someone Else's PMing, LLC. Here your overall profit takes a bit but Building 1 Inc easily deals with the change.

Building 2: Buy, fix, and hold for 24 months.  In the booming market in your city/neighborhood you have a lock on something you know is going to go up in value.  You plan on selling the place in 24 months.  So use your 8% here because you are 99% sure you will be staying put for the time it takes to sell the building.  

@Santos Vargas check out 

https://www.realtor.com/realestateandhomes-detail/383-Old-Route-940_Pocono-Pines_PA_18350_M44754-97092?ex=PA2368955922&view=qv

That is the best looking investment potential that I can see in the area.  Granted that is on a 3 minute search and eyeballing stuff :)