Hey!
In this edition of Everything House Hacking you can look forward to:
📍 Location, it’s important
💸 A deal made possible via short term rental
😬 Foreclosures
📚 Sweet resources
Let’s get started.
Lesson
Location, Location, Location
Cities across America have been reshaped over the past few years. An exodus from big cities to suburbia has occurred, resulting in the creation of new markets. Let’s take a look at a handful of key metrics to look at when considering a city you’re interested in investing in.
Population Growth - This metric looks at how many more people currently live in an area than before. It’s important to avoid investing in a declining area where renters are moving away from, indicating lower potential for increased incomes and appreciation. A rule of thumb for population growth rate is 20% over the last decade or two.
Income Growth - Here we consider how much the median household income has increased.. The target for income growth rate is 30%, an essential metric that allows us to evaluate if we will be able to increase rent over time.
Property Value Growth - Sometimes referred to as appreciation, this datapoint looks at how much a median house or condo value has gone up over a period of time. While appreciation can’t be banked on for any market, this indicator should help your odds at realizing one of the greatest benefits to real estate. We recommend a property value growth rate of 40% over the past 10-20 years.
Big Picture: These aren’t the only three metrics to consider when going down the rabbit hole trying to figure out where to live and House Hack, but they’re some of our favorites.
Deal Analysis
Want a deal you’re looking at to be analyzed, or want feedback on your analysis? Send it to support@everythinghousehacking.com
Time to show the midwest a little love, especially an area that knocks all of the metrics we mentioned above out of the park. This area seems promising, and here’s how we might be able to make this deal work:
The median rent for a 3 bed 2 bath in this area is about ~$2,500, and though this property appears to be in pristine condition and could probably demand a little more in rent, it’s safer to be conservative.
You’ll notice that rent won't cover my mortgage of $2,825 and we need to consider PMI, capex and potential vacancy that would bring the total monthly expenses to $800. Not very appealing, right?
Wrong.
This is where market research helps. The neighborhood this house is in has high demand for short term rentals (Airbnb, VRBO) due to a booming cycling industry. If I were to rent out the other two bedrooms I could yield ~$110 a night with an average of 12 expected bookings per month. That’s an extra $1,320 leaving me a $520 monthly profit.
It may not be ideal to have constant short-term renters, but we are here to build wealth!
Related News
The first quarter of 2022 delivered the highest amount of foreclosures we’ve seen since the beginning of the pandemic.
Here’s the backstory:
Throughout the pandemic foreclosure moratoriums were enacted to protect homeowners from defaulting on their mortgage through the CARES Act. However, most moratoriums were lifted by December 2021. As some homeowners took a break from making mortgage payments, speculation of a second 2008 housing crash was common click-bait in the media. This time looks a little different for a few reasons:
Some homeowners were allowed to file for extensions
Lenders are offering flexible payment solutions to homeowners such as payment plans, deferrals and loan modifications
Many homeowners have much higher equity in their homes now than 2008
Looking at recent foreclosure data can be slightly misleading. In the first quarter of 2022, 78,271 homes had foreclosure filings, up 39% from the previous quarter and 132% from a year ago. Though these levels are the highest we’ve seen in recent years, foreclosure activity is still at about 57% of where it was in the first quarter of 2020 prior to the pandemic.
What’s EHH’s Crystal Ball Say?
It’s foggy. Supply and demand is a bit out of whack, but interest rates are raising making it more expensive for potential homebuyers. Even if we said we knew what was going to happen, you shouldn’t listen — no one can predict the future.
Interesting Stuff
Podcast: House Hacking & Discipline are the Way w/ Jason Peterson
Discover how Jason started his portfolio after being released from prison with a FHA loan.
Quote: “You do not rise to the levels of your goals, you fall to the levels of your systems” - James Clear
Video: HOW TO: Increase cash flow by renting a spare room
This quick video will point you in the right direction if you want to try renting out an extra bedroom through short-term rental apps like Airbnb and VRBO. We also dig his surfboard.
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