All Forum Posts by: Rick Albert

A couple of thoughts:

-You don't know if the units are built to code. You won't know until you open up walls. The cost to get it permitted could be costly. I've had a few clients permit unpermitted units and it cost about double what they expected. 

-You can't go by what the Seller says regarding building codes, etc. Building codes change every year. It might have been to code when they did the work, but not anymore. That's how I was able to renegotiate the price for one of my house hacking clients.

-If the tenants wanted to, they could contact the City and get you into hot water. This includes you possibly being forced to pay them back for all the rent they had paid.

-I have seen appraisers fine with it as long as it looks decent. The real question is whether or not they call it out in the report and send to the lender.

-If it isn't zoned for three units, then it isn't happening. You can possibly do an ADU and JADU, but you would have to live somewhere on the property.

I'm not saying don't buy it. It could be a great deal, you just really need to do your due diligence. 

It's really about the lending. There are very special circumstances where a lender will count projected rents by the room. Otherwise, it is all about individual units.

Plus I would argue that the House Hacking Community is small. As a developer, you want to cast the widest net possible. Because it is a form of investing, it isn't like a HH will pay a huge premium because of it.

If you want to get creative, it might be interesting to see what is in your market and what tenants desire. For example, if you are in a heavy bike community, maybe installing bike racks somewhere might bring some character to the property and it doesn't cost a lot. If you are up in the mountains, somewhere to store snowboards. If you are in a college area, maybe having a study room/den could be interesting with the house pre wired for internet.

If you are really set on your buyer being a house hacker, another interesting option for house hacking is to have each room with their own locks, etc. That's what I did for my first house hack since I had roommates. The cost isn't much different and a buyer can go in and start renting out rooms immediately. 

If you are thinking of doing it in Los Angeles, it is likely a pass.

The City of Los Angeles has put in strict rules on what kind of properties can be used for STR and for how many days. If you go into a different market and the laws change, you are stuck with a lease with someone who may not want to cancel it (not to say you couldn't have a clause in there).

The main problem I have with this strategy is you are missing out some of the key wealth building factors that come with real estate. Out of the four ways to build wealth with real estate, you are only getting cash flow. You are not getting appreciation, tax benefits, or loan buy down.

The idea of them being expensive is that the lead generally buys more than one property, so the dollar per lead decreases. For example I got a lead through BP (organically, not paid) and we have closed three deals together totaling over $2.3M in volume. He's on track to buy one property per year and I'm his go-to every time.

I declined because of the price as well and I do well with networking. The challenge I'm seeing with agents on these forums is that they are providing literally ZERO value and just tote why their market is best. For some reason the Columbus, OH agents here in the forums seem to be the ones that do it the most.

With that said, at some point, we are heading to a paid lead gen system. There isn't enough business to go around at this point so we will have to spend money to make money. I would think this is especially true in lower price point areas. 

 Although the internet is great in theory, there are major cyber security risks with it. If everyone is on the same network, then it poses hacking potential. Plus if there are any internet issues, then you have to deal with it. I had an investor client who was out of town and there were internet issues. I had to go by there to try to fix it.

What responses are you getting?

There is a new(ish) ruling that states Realtors cannot have pocket listings (doesn't mean they don't). Plus, even if they do have a fixer, they have a fiduciary responsibility to get the Seller the best price possible. In my experience, I have always been able to get my fixer listings better sale prices when posted in the MLS. We are talking hundreds of thousands of dollars more.

When you are approaching the listing agents on MLS properties, what is the conversation? Is it that you want to offer significantly less than list price and they tell you no, does that make them a doofus? I'm just trying to understand what's going on.

Keep in mind the more tenant friendly the state, the higher the rents. There have been studies on this. They also happen to have decent appreciation. I understand the cash situation, so maybe this becomes a stacking/1031 Exchange play. So buy here for $250K, wait until it is worth $400K, then stack up to a different asset class.

It also seems like you are focused on SFR, have you considered multifamily? For example in some markets, you buy a fixer under $100K, then use the difference to fix up to add value. Then a few years later, sell and scale to bigger scale properties.

If I were a tenant, it wouldn't come to mind that I might need a tow service. So if I got up charged for something I don't think I would use on the daily, it would be a hard pass. Especially if the competition has less fees.

I'm on my second house hack (condo) and then my wife and I house hacked our ADU/Main House. First we lived in the ADU and the moved to the main house.

The next house we buy we don't intend to house hack, unless it is some great deal.

If you can house hack here, I would start here before going out of state. You can utilize equity and appreciation to then buy out of state. That's what I did.

My point still stands. From a buyer's perspective, I don't think I want to go into business with someone who I don't know. What if the other owner is cheap and doesn't want to touch the parking structure? What if they want to work with a different property manager?