Navigating Your First House Hack: Tips and Strategies
Starting your first house hack journey can be exciting and overwhelming at the same time. A fellow investor from the BiggerPockets (BP) community shared his experience and sought advice on his inaugural real estate venture. This ignited a conversation filled with valuable insights related to the househack investment strategy.
In this article we will explore some key takeaways and recommendations for those entering the world of househacking.
Taking Action
The BP investor mentioned earlier demonstrated admirable courage by taking the leap into real estate investing despite not feeling fully ready. A proactive approach is often the catalyst for success in real estate investing.
‘Action’ means something different for each investor since we all have different goals and financial profiles.
Some actionable steps to take towards your first deal are:
- Research recently “sold” properties in areas of interest
- Reach out to your sphere of influence to find out who currently invests in Real Estate or intends on doing so in the near future
- Connect with investor-friendly Real Estate professionals; get a pre-qualification or pre-approval letter from a lender to find out how much you qualify for and what you can do to strengthen your buying power.
Analyzing Deals
Some investors get their first deal without analyzing it. I did this and DO NOT recommend it. Running comparative market analyses (CMAs) and using investment property calculators provide invaluable hands-on experience.
Lets go over how to analyze a deal so that the data can be put to good use… negotiating!
How does one analyze a househack deal? What information do you need to have to run numbers?
Most data is available online either through the property’s listing, public records or via prop tech platforms such as prop stream, attomdata, RPR, PropertyShark, etc. The data needed includes (but is not limited to): Purchase Price; Current or Projected rental Income; Property taxes; Maintenance expenses; Capital Expenditures (CapEx); Utility expenses (heat, electric, gas, oil, water); Property Management fees; Other expenses i.e. homeowner’s insurance, landscaping, etc.).
Once you have all of the income and expenses for the property, you’ll be able to calculate what, if any, the monthly and annual returns are for the subject property. Keep in mind that whether or not the projected return is “good” is all relative. A 5% annual return in one area/neighborhood might be abysmal but if the property is located in an area where 3-4% returns are the norm, this is great news!
We recommend the BiggerPockets Investment Calculators.
Not sure which one to use, message us your plans, goals, or ideas and we’d be happy to recommend a specific calculator.
The last piece of your analysis will involve looking at Comparable Sales or “comps”. The best comps are similar properties with the same number of units, similar lot or building size, and within the same area.
Refinancing Considerations
The prospect of refinancing to leverage equity and expand one’s portfolio is enticing. However, it’s crucial to assess the associated costs and fees meticulously. Consulting with a lender will provide clarity on the feasibility and implications of such a move. Again, the CMA is a powerful bit of information as it will allow you to analyze similar properties in recently renovated or pristine condition. These properties give you an idea of how much equity you’ll have on your househack property post-renovation/upgrade.
Market Insights: Research the current landscape of house hacking opportunities, particularly in the NYC Metro area or any other area of interest. With a surge in NY small-multifamily inventory, investors like the gentleman on BiggerPockets (BP) have a wider array of properties to choose from, enhancing their chances of finding lucrative deals.
Strategic Approach
An astute strategy for finding the next investment is to explore properties that others may have overlooked. Though intimidating to some, these “ugly” deals present unique opportunities for those with a keen eye and a willingness to tackle challenges head-on.
Find out the average Days on Market (DOM) for a particular area, then look for properties that have exceeded the average timespan for a property to be on the market. For example, average days on market for 2-4 family properties in and around NYC have consistently been between 30-60 days for the last year. Beginning your search with properties that have been on the market 2+ months could lead to opportunities where sellers start negotiating against themselves early on.
Continuous Learning & Conclusion on Househacking
Having the eagerness to seek advice and learn from seasoned professionals and experienced investors is commendable. In the dynamic realm of real estate, continuous learning and adaptation are paramount to success. Read online forums like the ones on BP, reach out to people to hop on calls or grab coffee, attend online webinars and stop by some local meetups to absorb as much information as you can.
In conclusion, the journey from the BP forum contributor serves as a testament to the transformative power of initiative and perseverance in real estate investing. By embracing challenges, seeking guidance, and staying informed, aspiring investors can confidently and successfully navigate their house hack endeavors. Cheers to starting your exciting house hacking adventure!
