All Forum Posts by: Ryan Thomson

@James Devoe Sounds like a numbers game. Here are some questions I would think through to figure out what makes the most financial sense:

1. Did you get locked into a price for the rent to own that is significantly lower than how much everything has appreciated in the last two years? If so, you could have a lot of equity if you stick around and buy that house. If not, I don't see a big reason to stay in that home unless the fee to break the lease is MASSIVE. 

2. AirDNA is a great resource to get an average of what a home would do in your area. Sometimes there numbers are off, but its a good ballpark. This might make you feel more comfortable pulling the trigger. 

@Jason Breton There are some great opportunities here in the Springs for STR properties, you just have to know how to look for them. They are producing some NICE cash flow.

Another good option is student rentals. Buy near the colleges in Colorado Springs and easily rent by the room. @lionrealty and @Mark Hirleman are blowing up this space! 

I agree ^^^^. House hacking has an incredible ROI when you only have to put 3-5% down. Also allows you to get into the property MUCH sooner and the benefits of that are huge (appreciation, loan paydown, scaling and getting the second home, etc).

As a friend of mine says: "No house is perfect, just get started". 

@Bradley Dosch has some good ideas about being creative with SFH. I've converted and furnished garages for 17k and 26k. Walkout basements are also a creative way to split two units. Where I am from I like to airbnb the separate unit as it does REALLY well and ofter covers the mortgage.

Nice! Keep us updated on how the KC investment goes.

Hey @Curtis Towers I don't have an accountant, but here is some things to think about when you talk to a CPA.

I've actually done a couple househacks with airbnbs myself and just met with my accountant today to get ready for filing 2021 taxes. We talked about a lot of what your question asks.

Things to consider with your taxes though.

1. Use an accountant to file your taxes. They are worth every penny.

2. While I lived in my house hacks I was able to depreciate the percentage of the square feet of the home that was occupied by my tenants. This was while I lived there. Once I moved out (to the next house hack) I was able to start depreciating the full value. In addition to depreciating that percentage you can also deduct expenses that are for the whole house at that same percentage while you live there. E.g. repairs, supplies, etc.

3. Make sure you talk to your accountant about Qualified Business Income Deduction (QBID). It basically allows for your first 20% of rental income to be tax free.

4. If you want to scale, and cancel out the mortgage debt on your DTI I would recommend showing income on your taxes.

Butttt I'm not an accountant so these are just ideas.  :) 

@Lauren Zuend I'd start meeting and talking with lenders now. Build relationships and start learning who is more "house hacker" friendly. I would tell them what you want to do and ask them what you need to make it happen. Then you'll have some concrete financial goals to work towards and know your options. 

I would ask them not to pull your credit until a month or two before you are ready to start looking. 

I am so jealous of you @Lauren Zuend. So smart. I wish I had started out of college. 

1. I would keep in mind that if you get a duplex, triplex, or quad you are going to have to put 15% down with a Conventional loan. So sticking with an FHA might be better if you can get it for only 3.5% down.

2. For resources I really like the following House Hacking episodes on Bigger Pockets Podcast: #352, #252, #350, and #249.

3. Happy to talk if you want any more advice.

4. The other thing to thing about is how long do you need to be employed in order to qualify for a loan. Have you met with a lender yet? 

Hi @Lucas Carroll. Great first question. I've actually done three househacks myself and just met with my accountant today to get ready for filing 2021 taxes. We talked about a lot of what your question asks. 

First of all, an LLC offers no tax advantage (according to my CPA). It just passes through to your personal income taxes.

Other things to consider with your taxes though. 

1. Use an accountant to file your taxes. They are worth every penny.

2. While I lived in my house hacks I was able to depreciate the percentage of the square feet of the home that was occupied by my tenants. This was while I lived there. Once I moved out (to the next house hack) I was able to start depreciating the full value. In addition to depreciating that percentage you can also deduct expenses that are for the whole house at that same percentage while you live there. E.g. repairs, supplies, etc. 

3. Make sure you talk to your accountant about Qualified Business Income Deduction (QBID). It basically allows for your first 20% of rental income to be tax free. 

@Craig Curelop

We hear about it all the time on Bigger Pockets and for good reason. House Hacking is a fantastic way to get the snowball of real estate investing rolling. A term created by Brandon Turner, although he probably stole it from David Green; house hacking is when you buy a home for yourself and rent out the rest of the rooms.

It works in most markets and often allows the house hacker to live for free. But what if you could take it to all the way to financial freedom. Here is my story.

Education

It started with the podcasts. Then I started reading some of the Bigger Pockets books like “How to invest in Real Estate” and “Set for Life”. I read “Rich Dad, Poor Dad” and “The Richest Man in Babylon”. I began to realize that this wasn’t some pipe dream or get rich quick scheme, it was a very real path that people were taking to put themselves in positions to have enough passive income to leave their jobs and live life on their terms. House Hacking, like anything, required knowledge and education.

My two favorite quotes during this initial education phase were:

1. What’s the worst that could happen if you try this and fail? You are right back where you started, working a job till you are 65 and have enough income or pension to retire.
2. If you can live like no one wants to for a couple years, you can live like no can for the rest of your years. (corny, but so good).

Mentor

I knew if I wanted to scale my house hacking and eventually replace my income, I would need a good exit plan for each house. I discovered student rentals and the great cash flow they provided. I lived by a college and one day I saw a flyer taped to a light pole, ruined by rain. It had a number I couldn’t read. So I went the next light pole hoping there would be another flyer. There was and this guy was renting 6 homes out to students. I wanted to do what he was doing. So, I called him. I told him his flyers were ruined and that I wanted to buy him lunch to learn what he was doing. His reply? “I’m too busy for lunch, but I’ll show you my properties”. Fast forward a couple months and this “too busy for lunch” guy, Mark Hirleman, is my realtor and mentor.

House number 1

Listed on the MLS as a three bedroom home, Mark called and said I think this one has potential. We had agreed that we needed 5 bedrooms so that we could make more cashflow with house hacking and later with the exit plan of student rentals. So I was a little confused, but open minded. When we toured the house there was actually 4 bedrooms (one was just non conforming). There was also this awkward two car tandem garage. Where if you drove through one you could get to the second garage at the back. Weird. Mark said "here is your fifth bedroom". With his help drawing the plans and finding a contractor, I turned that second garage into a 200 sq ft studio apartment with a kitchenette and a full bathroom. I paid for the conversion with a 20K personal loan at 10% for 10 years from my Father (my own father, gouging me at 10% interest). This garage now nets me $1450/month on average on AirBnb.

I bought the house for 260K and 5% down. The rest of the house I rented for $600 a bedroom for a total of $1800/month.

That’s an income of $3250 a month ($1450+$1800) and a mortgage of $1550. After budgeting for some expenses and also adding my $500 in rent avoidance I was netting $1,902/month in additional income + savings. That is a 139% return on my down payment and closing costs ($16,369).

$1902 X 12 = $22,833

$22,833/$16,369 *100 = 139%

House number 2

That cash saved up quick. In a year I had saved enough to buy a second home.

I rinsed and repeated.

This home had three bedrooms, a second family room, and a two-car garage. I converted the second game room into a bedroom by adding a closet ($1,000). And I converted the two-car garage into a separate 400 sq ft studio kitchenette ($25,000). I funded this from three different $10,000 personal loans. I know had 5 rooms. I rented three rooms for $600 and the studio for $1,000. For a total rent of $2,800. And once again I lived for free (saving me at least $600 in rent).

Financially Free

I’m cheap. Like annoy my friends and girlfriend cheap. My yearly expenses, that I started tracking three years ago, average about $18k a year.

House number 1 – Now makes me $3800 (I moved out and rented my bedroom for $600)

House number 2 – Makes me $2800

Subtract Mortgage and Expenses

House number 1 – makes me $1,952

House number 2 – makes me $458

For a total of $2,410 x 12 = $28,920/year

Expenses/year - $18,000-20,000

Real Estate has been a game-changer. Its created a ton of options for me.