All Forum Posts by: Rick Albert

It can be normal but it is silly on a practical basis. They want to know that you are a serious buyer. On the flip side, they should just say, "send me a pre-approval and POF and here is all of the information on the property, do you still want to see it?" That would be a better approach.

Go ahead and write an offer at whatever price you want. Then go in and renegotiate because you couldn't see the inside and didn't know of the condition, etc. 

I get the logic that you can write an offer assuming it needs everything. But everything would mean a tear down. You don't know the condition of the foundation, roof, termite damage (if it is a thing out there). Too many variables.

If it were me, I would low ball them, come to an agreement, and then do another round of negotiations once you can get inside and do your due diligence. 

There are flippers in every market.

I can't speak for Philly, but in Los Angeles, the preference for many flippers is the higher price point because the don't have a choice. Keep in mind the cost of raw materials (drywall, plumbing, electrical) are the same whether it is a $100K home or a $1,000,000. However, with the higher price points, your money goes farther because of the same costs.

How long did the $1.85M property take to sell? 

There are buyers at that price point, such as pro sports, doctors, tech, etc. With remote work, people are able to move all over the country and keep their high salaries. There may be an opportunity but you need to study the market.

I would just renew at the same rate if you have concerns. Let them bring up moving. If you offer a discount, they may ask for a bigger one. Not raising rent makes it look like you are a great landlord. Many expect a rent increase, not decrease.

You have a couple of options:

1. Why go JADU and not full blown ADU with it's own meter? I know it is more expensive, but depending on the situation might make sense for resale, etc.

2. You could charge per square foot. It isn't truly accurate but it is a start.

3. You could charge a flat fee on utilities with a clause that states if bills exceed $X, then you split based on square footage.

I've done all of the above and it has worked out.

Regarding the thermostat, you may want to put in a mini split for the JADU in case your tenants like one way but you like the temperature another.

Hello Angela,

Welcome to the BP community! I'm a 2x house hacking investor here in Los Angeles and have worked with many house hacking clients.

1. Your goal is to cash flow positive? If so, unfortunately right now in this market that isn't possible. Here is what I tell everyone: If the property cash flows at 3.5% down, why wouldn't an investor putting 20% down buy it? I'm not being negative, I'm being realistic. Appreciation plays a big part in this. 

2. There are four ways to make money in real estate: 1. Cash Flow 2. Appreciation 3. Loan Buy Down 4. Tax Benefits. Even though it doesn't cash flow today, are you factoring in the other three?

3. Get creative. On our second house hack, after building the ADU, my wife and I moved into the studio ADU and rented out the main house. We refinanced twice before moving into the main house. We probably could cash flow if we rented rooms and after raising rents on our ADU tenants, but choosing not to.

4. From The House Hacking Strategy, published by BP (and I'm a case study in the book), Craig talks about the profitability to comfortability scale. The more uncomfortable you are, the more potential cash flow. This is important as you understand where you want to be. I have a client who is renting each bedroom and the ADU. I have another client where his family live in one unit and rents out the other on a month to month basis.

Hey Margarita!

Welcome to BP. I'm a 2x house hacker here in Los Angeles, including one with an ADU. Definitely changed my life!

Most house hacks in high cost areas don't really cash flow. The reality is if the numbers worked with 3.5% down, why wouldn't an investor pick it up at 20% down? It would be a phenomenal deal for any investor to pick up. 

A couple of "unrealized" income to consider:

1. Loan buy down.

2. Tax benefits.

3. Appreciation.

Your negative cash flow will be picked back up from the above three, so as a house hack I wouldn't sweat it. Rent Control is a two sided issue. On one end it is so horrific and cost you a lot of money and headaches, especially when there are other markets to invest in. On the other side, economics have proven that rents go up significantly and vacancies are extremely low due to rent control. So with the right vetting, solid leases, and overall best practices, you can actually do really well. 

I did this when we built our ADU. My wife and I lived in the ADU and we rented out the main house. We did it for two years before moving into the main house.

The best part is you can still do refinances since it is technically owner occupied. We were able to refinance twice now. Plus it was able to give me unique insight into living in a small space for when I buy more properties and help my clients do the same. 

I recommend doing it if it makes sense. 

There are so many more questions to ask such as your personal income, savings rate, etc., but let's take this on the surface. Especially since everyone will have a different opinion.

Here is what I would do:

1. Put as little down as possible.

2. Use the left over money to put towards another investment (whether it is real estate, stocks, or even a high interest savings account).

3. When you are ready to move, you can then evaluate. During that 1-2 years, you have had loan buy down and hopefully appreciation in both property value and rent. This way, when you are ready to refi, may not have to put as much money (or any money) into the deal to move forward.

First of all, you did the right thing and you did not make a mistake. Why? Because you put yourself in an uncomfortable situation that will motivate you to move forward.

When my wife and I bought our second house hack, it was a disaster. It was a four month project that took a year and cost way over budget. So what did we do? We moved into our studio ADU and rented out the main house, worked our tails off to pay off credit card debt, refinanced and now live in the main house and rent out the ADU where the tenant is paying more than the interest on our loan. It was painful, scary, and stressful, but we got through it and came out better on the other end.

Use this as motivation to save and buy that SFR (or maybe a duplex is a compromise) and keep this as a rental.

In terms of mortgage fraud, I'm not a lender or lawyer but the language typically says that you got this loan with the "intent" to move in. You did and you are living there. Moving out sooner will trigger questions but most lenders require an explanation (i.e. needing more space) and they move on.

A couple of thoughts that come to mind:

1. I don't know where your property is but can you repurpose the space? For example convert to STR or MTR for your unit to increase cash flow? You already have furniture there so if you are willing to leave it, that saves you time and money.

2. Is there PMI? The goal here would be to remove the PMI as soon as practical using the least amount of money. You could put more money towards the mortgage but then you wouldn't have the funds to buy the next place. Maybe you can make improvements to the property, which would be a better use of money.

3. If you are really in that horrible of a situation, you could go rent somewhere. This would be a step backwards but your mental health is more important than anything else.

4. Could you put rules in place with the tenants? Quiet hours for example.