This is installment number two in my series on house hacking. It contains a detailed tutorial on how to analyze a house hack listing. I talk about 3 different potential house hacks: a good one, a bad one, and a REALLY bad one!
DISCLAIMER: Nothing in this video should be construed as legal or financial advice. The views and opinions expressed do not necessarily reflect those of my law firm or any of my business partners.
The criteria I use to analyze a potential house hack listing includes the following:
1. Location/School District
2. Price to Rent Ratio
– 1% Rule at minimum: i.e. monthly gross rent should equal at least 1% of the purchase price. This is a rule of thumb and obviously, looking at the actual expenses involved with the property is the next very important step. You need to make sure the property can actually cash flow after you move out and rent your apartment to a tenant.
3. Year Built/Age of Property.
4. Layout, Finishes, Curb Appeal.
5. Other Features:
– Utilities (i.e. are water and sewer public or private? Does the water come from a well or septic?)
– Square Footage
– Number of Bedrooms and Bathrooms
– Type of heating (gas forced air furnaces are best)
– Type of cooling (central air units are desirable to tenants)
An important point I want to stress is that you should not rely solely on the listing analysis described in the video to make your buying decision. The listing analysis is just the starting point. Once you feel pretty confident that the property whose listing you analyzed fits the criteria you considered, you have to move to the next step, which is to physically view the property and confirm your assumptions about the various numbers and features. You should obtain actual copies of tax bills, leases, etc. Before you go through with the purchase, you should also get the property inspected and make sure there are no major issues that you did not account for.