All Forum Posts by: Rick Albert

Hey Jason,

Glad you want to get into house hacking. That's how I got started.

Regarding buying a fourplex, it looks like in order to get what you want, it would likely need to be 100% vacant, which is challenging in Los Angeles. Rarely do I see 4 plexes on the market where two are vacant and the other two are either also vacant or at market rents. Many have tenants in place. But I have seen ones 100% vacant. Just wanted to give context.

If you go the VA route (thank you for your service), both of you need to be Veterans. Just FYI.

To be honest, why have him with 25% equity and you 75%? Why not just own it 100%? Partnerships can be a lot of work. The MFU market is struggling so you may be able to negotiate your closing costs to be paid by the Seller so you don't necessarily need him to buy it. The only caveat is having money for repairs. If you do go the business partner route, you really need to lay out at least two things:

1. Who is responsible for what? With my business partner, I'm in charge of filling units and managing the buying and selling. He is in charge of back end accounting and operations. 

2. Do you have the same philosophy on how to run the business? Before I got into business with my partner, we ran through scenarios that we have experienced in our own investing and talked through how we would handle it. For example, how do you handle rent increases? How do you handle repairs? Band-aids or full replacements? If you have different ways of handling situations, you can get into arguments down the road. I've seen it happen.

Good luck!

People here have posted good resources. I think there are a few considerations as I've looked into STR versus LTR. My conclusion was you net about the same but with way more work with STR.

Generally rule of thumb is monthly income with STR can be around 30% higher than LTRs. But then you have to subtract at least the following:

1. Utilities

2. Internet

3. Higher vacancy

4. Airbnb's fees

5. City fees and permits

6. Maintenance of furniture and restocking supplies

It is very time consuming. I've had clients in this space basically they watch the calendar like a hawk so if there are down days (for example a random Tuesday-Thursday vacancy), then they drop the price considerably just to fill it. Something is better than nothing. That's how you get your 98% occupancy rate. But you have to pay attention it. 

I'm not saying don't do it, as there are a lot of reasons where it makes sense. Just you need to be aware of it plus any laws surrounding STRs. Many cities are cracking down on it. 

Every market is different, but in Los Angeles ADU properties are in high demand, but not with house hackers. They are wanting it for their parents, uncles, etc.

Plus if you are trying to get top dollar, investors are the last one to typically buy your property. They are focusing on the numbers, not the emotional appeal. This means that house hackers are a great option (I've sold many properties to house hackers), I wouldn't hang your hat on it. 

Professional photos, make it clear that the property will be delivered vacant, and list in the MLS with open houses, email marketing, etc.

Hey Nana,

A couple of things to note:

1. It's a great idea to get started now. You would be paying rent anyways, so you might as well own it.

2. Unless your financial situation is different than a typical college student, you will likely need a co-signer. Parents are usually the go-to.

3. I would focus on 3%-5% conventional over FHA if you are buying a condo or townhouse. Condos and townhouses have to be FHA approved, and many aren't. You can get a "spot approval" which is basically an exception, but I haven't met a Seller willing to take a chance on that unless they are desperate. Keep it simple.

Good luck!

Hey Jacob,

I started with house hacking before moving my money out of state. I never would have been able to do it otherwise. I currently house hack (not for long) near where you are now and leveraged my current property to buy more.

I would consider house hacking first. It gets your feet wet with bigger loan buys downs and bigger dollar appreciation (3% on $1M versus 3% on $100K). 

Happy to talk through it.

Regarding the short term rental approach, you need to check with local laws on what you can and can't do. In some cities, you can't do STR for multifamily or you can but only one unit.

There also could be taxes, licensees, etc. with STR. I would just do all of your due diligence before going down that route. And then factor in cost of furniture and utilities. When I've ran the numbers in the past (not Houston specific), it really broke down to almost the same as what I would rent for long term, but then save money on vacancy and time managing it.

It is all about opportunity costs.

The advantage is easier to manage with a second unit on the lot. But an argument could be made that you could take that $150K (or however much it costs) and reinvest in a different house hack. Are there properties with ADUs already built? If so, I would consider that route. Live in the new ADU, rent out the main house and rent out your previous residence. You used the same case and now have triple the doors with two properties appreciating, loan buy down, tax benefits, and cash flow. You scale faster.

I've had clients do it and been successful.

The challenge is no one can really give you an answer because each property is unique.

For example, I had a client buy an unpermitted unit and had to move 15 feet of wall away from the setback. Now that isn't a requirement. I have another client that is in the process right now and it is taking forever dealing with the City.

I've been told it is getting easier to permit. The City is short housing and making exceptions. 

All depends on the property.

In my mind and experience, there is no advantage unless the listing agent is that greedy, in which case you aren't going to get the best deal.

Plus keep in mind once there is dual agency, the agent has to stay neutral. This means they can't really negotiate hard for you. You may not be getting the best deal. As a matter of fact depending on the relationship, that agent still might favor the seller, even though they aren't supposed to.

To be honest, no one here will be able to give you clear advice. There is a reason why people hire agents and attorneys. This is especially true if this is your very first deal. You need someone hand holding. As a buyer you are on the hook after closing so you are taking on more risk than the Seller.