All Forum Posts by: Chace Fraser

@Loubert Jean Philippe

If you are using a low down payment option, it's not really realistic to expect to be cash flow positive while you’re house hacking and living in the property. However, if your house hack reduced your housing costs from $1,200 to $600 per month, would that not be a win? That would create an extra $600 per month of “cash flow” that you could save and invest in your next property. Keep in mind the property must cashflow after you move out for the deal to make sense (in most scenarios). When an investor is looking at being cash flow positive, they are typically putting down 20 percent or more. If you are in a high demand metro area, it's simply not realistic to expect to be cash flow positive if you are putting down 0-10%.

Now if that is all the capital you have, that is what it is. Is it better to keep renting than to buy? Typically it is better to buy. Better to build your own equity through the debt paydown, enjoy the tax benefits of ownership, and garner the equity of an appreciating asset. You just can't expect to cash flow on an initial purchase with a low down payment. Now with time and rent growth, what could be a negative cash flow property might very well become a cash flow king, but that takes patience.

Another way to increase cash flow would be renting out rooms in the unit you live in, either Airbnb or longer term.

When I’m analyzing the numbers on a house hack I go through this progression. Keep in mind I’m in a high cost of living area so some of this may not be relevant to you. These “hurdles” typically go from easy to clear to harder and harder to clear. Better “deals” will clear more of the hurdles.

1. I first start by running the 1 percent rule calculation on all properties that are available (gross monthly rent / purchase price). I run the calculation a couple times. First, I use current rents, and then market rents. If a unit is vacant I’ll use what market rent would be for that unit. This gives me a baseline for my market so I’ll know a good deal when it comes around. In my market 0.6 is a good output. If it's around 0.6 percent or higher I'll then go into the next scenarios.
2. The buyers housing cost must be lower than it was before. This one doesn’t always apply. What if you were living with your parents rent free? What if you were living with a friend and they were charging you way under market rent?
3. Will the buyers portion of the mortgage payment be LOWER than the market rent for the unit they plan on living in. If you are renting a 2/1 and the market rent for that type of rental in the area is $1,000, then the amount of the mortgage payment you will be responsible for must be lower than $1,000. Otherwise, why would you pay more to live there? Remember, the goal of house hacking is to reduce your housing costs
4. The property must be cash flow neutral or cash flow positive at the current rents if you were to never move in. If a unit is vacant I use current market rent.

This is where I start. If a property clears these hurdles, I’ll then start to dig a little deeper

@Aften Hennricks kudos to what @Brad Hammond said. Also, your questions are justified and well thought out. I'd take them directly to your realtor and just have a conversation with them. "Hey, we did a little research and asked around..."

Sounds like you have some good ideas! I'd recommend speaking with an investor friendly agent who's in your same shoes about what options you might have. @MichaelHaas (for some reason I can't tag him) would be a good one to contact!

Besides figuring out what your goals are, how you want to get started, and meeting like-minded people, the first action item would be to talk to a lender. In my experience working with house hackers the majority of the questions center around financing the deal.

When it comes to finding the right lender there are a few things you’ll want to keep in mind. Lenders, like realtors, are not all created equal. In order of importance, here’s what I think is important to look for in a lender. You want to make sure your lender:

Has worked with house hackers before; the rules change depending on what loan type you use and how many units you purchase. There are A LOT OF TRAPS along the way that can/will make the deal fall through (and cause you to lose your earnest money). You want to be sure the lender you choose has successfully navigated them before.

Can help you strategize the lending piece for this purchase AND purchases in the future

Is an investor themselves

Best of luck!

Mark J. Kohler is a RE minded CPA and Attorney. He's out of Utah. He's written quite a few books on the tax advantages of investing in real estate. 

Hey @Account Closed

I tried this before but the post was removed so I'm trying again :)

House hacking is an incredible way to get into buy and hold real estate investing with a relatively low financial barrier to entry… plus the added benefit of reducing housing costs! There are lots of great RE communities around town, a great place to find them is in the events and/or networks tab here.

If you have any questions about the PDX market there are lots of people on here ready to help! 

@Brad Hammond thanks for the shout out! @Tyler Yontz you got a lot of great advice from everyone here. Send me a message and let's connect to get your strategy dialed in so you have clarity and can hit the ground running when it's time!

@Alleia James 

Getting a loan as a college student, or someone fresh out of college can be tricky. But it is possible and you have a couple of options.

Typically, lenders require borrowers to have a two year employment history. Although, if a graduate is going to get a job in the area in which they studied in college, oftentimes the lender can count that towards their employment history. You will still need a job (or job offer) and you will still need to qualify for the loan (down payment, credit score, DTI, etc).

Another option would be to have a “non occupant co-borrower” like a parent or rich uncle. These people will cosign on the loan with you and are taking on the risk/liability along with you. I work with a lot of college students who are looking to house hack and have no way of qualifying because they don't have any income. What they need is an "investor" (oftentimes parent(s)) to help them qualify.

When I was working in corporate America I was in the same situation as you. What I did was write a business plan and presented it to my "investors". It laid out my strategy (which was to house hack) and all the benefits of it. Because I was serious enough to take the time to write out a business plan I found investors willing to cosign on the loan.

Fast-forward to now, what I've done is turned that business plan into a template that I give out to clients who are looking to house hack but have no way of qualifying on their own. They just fill in their info into the business plan where applicable and can send it out.

If you (or anyone reading this, agents included) want a copy of this business plan just send me a DM or email (email address is in my signature below) and I am more than happy to share it with you.

@Ron Neal this is awesome, congrats on getting started! Sometimes the first step is the hardest and scariest. House hacking is a great way to accelerate your investing career. Best of luck!

Hey @Larry Hucks, I've got a great lender (who is an investor too). Shoot me a DM and I can connect you two.