All Forum Posts by: Chace Fraser

@John Fernald welcome to BP and the world of real estate investing! Don't limit yourself to just BP though... go out and find people in real life. The best local organization here is Investor Lab which is run by @Mike Nuss and @Tyler Combs. Look into it and join. They offer a ton of CE classes that are real estate investment centered/related. When we're able to meet up again they put on monthly meet ups that are incredible networking and learning opportunities.

If you want to chat about the local investment market let me know!

@Alvin Jean be sure to hang your license with someone who is already working with the types of clients you would like to work with and is a real estate investor. Take a paycut for the first few years as an agent to learn the ropes from someone who already know what they're doing... it'll pay HUGE dividends in the future. You may post here on BP "any investor friendly realtors in Miami, FL?"

Best of luck!

Hey @Fernando Puga and welcome to BP! There are a lot of factors to consider when house hacking. 

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.

I'm an agent in a high cost of living area and the first couple "hurdles" a house hack financial analysis needs to clear are "will the buyer reduce their housing cost" and "will the buyers housing cost be lower than market rent"? If the answer is no to either of these then we pass on the deal.

I recommend you contact @Michael Haas. He's a house hacker, investor, and agent in the Seattle area and does a wonderful job. 

@Andrew Lampron 

Welcome to the BP community. Just by joining you are taking the first step to financial freedom.

First off, you will need to decide on your ultimate goal for investing in real estate and then determine how you want to get involved/start. Do you want to be an agent, a buy and hold investor, flipper, wholesaler, etc... You need to figure out a plan on how you plan to attack one or more of those target areas. Next is just sitting down and following that plan to the best of your ability until you have reached your goal.

It's ok if your ultimate goal/plan changes, and it should really. As you experience, grow, and learn more, you'll have a better understanding of how things work and what ventures may be best suited for your personality and lifestyle preferences. However, try to keep on blinders when it comes to shiny object syndrome. Pick one strategy and start with that. After you’ve done a few deals of that type of strategy you can move on.

I think house hacking is a great way to get your feet wet in rental investing, especially if you can find a duplex or so and live in one half and rent out the other half. There is tons of information on the forums and various professionals on this site.

Best of luck and I look forward to hearing how it goes!

@Caitlin Daniel how long do you want to continue paying someone elses mortgage? House hacking is a leverage and interest rate play. You're not going to find any types of great deals in this market (as you've learned), but you can find one that's good enough. Just make sure the rents will cover the mortgage payment if you weren't to move in.

Hey @Nicholas Parker welcome to BP! When we're working with house hackers in our market here are the occupancy options

1. One or more units vVacant: this is the easiest option for a house hacker. If there is a unit vacant that is the unit you move into. This happens 30-40 percent of the time
2. Owner Occupied: if one of the units is occupied by the owner, it's reasonable to assume that when they sell they'd move out. Then you'd move into that unit. This happens less than 10 percent of the time
3. Month-to-Month: In our market, you can "no cause evict" someone if you the buyer are going to move into that unit IF they're on a month-to-month tenancy. Yes, even during COVID you can do this. It does come with risks and the tenant gets a relocation fee. This happens about 40 percent of the time
4. Fixed Term Lease: This only works if the tenants' lease is ending in the very near future (90 days or so). They would still be served a no-cause eviction notice. The timing of this has to be right, so this only happens about 10 percent of the time.

Contact an agent in the area who has worked with house hackers and they can help you through this. To find one search for people here on BP who are in your area and are house hackers. Ask them to connect you with their agent. 

Best of luck!

Hey @Jeffrey Mahoney, welcome to BP! There are investment deals in all markets, the strategies just change. High cost of living areas (like west coast cities) don't see as much cash flow but see more appreciation. A fantastic opportunity here would be to house hack; get yourself into a property worth more than half a million with just 3.5 percent down. And, by the way, median prices are up over 10 percent from last year. Will they continue to rise at that rate? Your guess is as good as mine... but with Portland being one of the less expensive, large west coast cities with high inflow of people, it's very possible. Maybe not at 10 percent per year, but continue to go up, probably. 

What we see a lot of people do is purchase a property as an investment, make sure it cash flows, and then after a few years trade out of it and move the capital to higher cash flow markets. 

Think of it this way:

• Buy a duplex for $600k with 3.5 percent down (with closing costs that'll like be $30k out of pocket)
• House hack it to minimize your housing costs so you can save up more money
• Sell that property 5 years later for $725,000 (assuming 4 percent appreciation) and move those funds to another real estate asset

You could even house hack every couple years to build up a portfolio with little money out of pocket

There's a lot more to this strategy. I'm happy to go over it with you so you can get clarity on it. Send me a DM if interested.

@Patrick Flanagan I follow a lot of Dave's rules... except when it comes to investing. I think his philosophies on investing are not correct yet he's so deeply entrenched in them it would be "bad business" for him to change his tune. Additionally, @Matthew Crivelli's definition of over-leveraged is one of the best I've heard!

Some things to keep in mind

• These days banks are not calling the note due on a mortgage that is performing.
• Did your mentors mention the "self sufficiency test" to you? In order for a bank to lend on a 3-4 unit property, the property must pass what is called the “self sufficiency test.” This is so the bank can mitigate their risk. Here’s the equation:

Gross rents for all units LESS a 25 percent vacancy factor MUST be greater than or equal to the mortgage payment. >

or

(Gross Rents * 0.75) ≥ PITI

Basically, when you buy 3 or 4 unit properties, the bank has tighter underwriting rules. Very, very few 3-4 unit properties qualify in our area unless you put more than 3.5 percent down. When you talk to realtors or lenders I recommend using this as a litmus test. If they don't know what it is, go find another one.

It sounds like you've been bit by the real estate investing and biggerpockets bug... that's why we're all here! What is and isn't possible is different in different markets due to things like landlord-tenant laws, price-to-rent ratios, and more. I've helped a lot of house hackers in the area. Shoot me a DM if you'd like to connect and strategize.

Hey @DeWayne Mann there are a couple in the area. I'll DM you their names. They're based in Portland but should be able to help you as well.

@David Lao Nice! Yes, the self-sufficiency test is brutal (especially in high cost-of-living areas). When someone asks for help/advice on how to find a good realtor/lender I say to them "ask the lender/realtor if they know what the self sufficiency test is. If they don't, find one who does."

And when we have clients who want to offer on a 3 or 4 unit property, we go to the lender first and ask if it passes before we submit an offer.