All Forum Posts by: Rick Albert

From my experience, tenants respond well when they know a place has been remodeled and never lived in. 

Keep in mind if you remodel now, you are adding wear and tear. If you wait, then you prolong future repairs.

If you are good with what you have, enjoy living there and do it after.

Hello All,

I'm currently on my second house hack here in Los Angeles (I also own properties out of state). I'm one of the case studies in the BP book, The House Hacking Strategy. I thought about what makes managing a good house hack and thought I would share my experiences (and would love to hear yours).

1. Having general rules is so important. This includes (but not limited to):

-Quiet Hours

-What spaces can and cannot be used

-Guest policy (make sure to limit days in a row and in a month)

-Pet policy (even if you don't allow pets, if someone has an ESA animal, it would be good to have guidelines in the event they surprise you with one, otherwise you are SOL and of course take into consideration fair housing laws)

-How is trash put in the cans (in bags, not just thrown in) and when can trash cans be taken to the street and put back

-How is the late free structured (one time flat fee or a daily fee)

2. Living for very cheap/free takes time.

I'm at the point where if I rent out my main house, it will cash flow positive. Before, I lived in my ADU and had to wait to refinance before seeing real savings. If you are putting low money down and expect it to cash flow, that is likely not going to happen. If it cash flows at 3.5% down, why wouldn't an investor putting 20% just buy it?

3. The appreciation is where the value is.

- Because of appreciation, I have been using HELOCs and sold my last house hack in order to scale out of state. I never would have been able to do that if I had been renting this entire time.

4. I did the FHA 203(k) loan.

-It was extremely difficult to work with but I would do it again.

5. Start small, it doesn't have to last forever.

-My wife and I were broke with our second house hack. We moved into our studio ADU and lived there for two years before we moved into the main house. That was the best decision we ever made. It was a great experience and we saved a lot of money in the meantime.

6. Even with a house hack, think about experiences. 

- Our ADU has it's own backyard, washer/dyer, and a front patio. We designed it so no windows look into the main house. These are things tenants value and it doesn't cost much money to do it.

What are some things you add?

Thanks!

Some properties have a higher probability of appreciating faster than others. We cannot bank on appreciation but conceptually a 3% increase in value on an $850K property is more "cash" than a 3% appreciation on a $200K property.

You wouldn't need the capital if you get the HELOC (this is assuming you qualify). If you are stretching yourself thin, then the HELOC approach may not be best. It just depends on the property.

Why can't you do both?

Because I bought in LA, I used the appreciation to buy rentals. For example, I started with a condo, did a HELOC to buy my second LA house hack. Later I sold the condo and did a 1031 exchange to bought properties out of state. I also used a HELOC on my current house hack to buy. One strategy is to leverage the appreciation here to buy elsewhere.

Right now the data is showing continued appreciation in the LA area. There isn't enough land to build and it is mathematically impossible to build affordable housing. 

I also don't recommend you stretch yourself so thin. That could be dangerous as well. Consider a house hack here to help offset the costs. I understand house hacking isn't for everyone, but it also doesn't have to be forever. 

There is a 99% probability you cannot. My first house hack was a condo. I fixed it up and rented the second bedroom. There may be ways to share space but give the impression of a separate unit (such as an unpermitted wall up to create separation). 

Condos can be very good investments if done right. There are still some deals out there if you look hard enough.

Thank you!

You will need to double check with a lender but my understanding is yes, they will look at current or appraised rents, whichever is lower, and factor in 75% of the rents. They don't care if you are a first time buyer as the risk is all the same.

I've done open houses for my rentals. You send them your criteria ahead of time and tell them the window that you will be showing the unit. Because you will be there anyways, it doesn't really matter to vet them. Plus you want as many people through as possible. Even if they aren't qualified, it gives the impression you have a desirable place and those that are qualified will see it and hopefully jump on it.

If the property is in California and she is saying that you did have an inspection contingency, then you have to actively release it, which means you have an opportunity to bail out today. It isn't typically automatically released like it is in other states.

In parts of the Bay Area, people are coming in over asking with no contingencies, unfortunately that is becoming common. It isn't common here in Southern California (not to say I haven't seen it as I closed one this year like this). 

Now, because there is two sides to every story, you do have to take some personal accountability. The agent told you in order to get the property you need to pay $20K over list with no contingencies. That was a choice that only you can make. She couldn't force you to sign the offer.

The question is how was all of this presented? If the agent was as aggressive as what you are saying, then yes, I would agree with everyone, that the agent probably deserves a bad review. But if the agent explained everything to you, including showing comps, making sure you understand the risks, etc., then it could be a different story.

There are a lot of bad agents out there, but there are also a lot of good ones. When emotions run high, it is important to take a step back and see everything on a high level.

What has worked well for me is looking at properties that have been sitting on the market. They are sitting because either the agent sucks or it is over priced. That is where some of the best negotiations happen.