There are some rules of thumb to go by that can substantially make your home owner occupied investment worth it. Some of the best practices of the investment are that the town is going up in value, houses are bought quickly/rented, the property you are buying has more to be rented out than you are living in, and much more!
1. Find The Right Town For the Live In House Investment
The town you are buying your house in should be increasing in value or at least be adjacent to a high upper-class neighborhood where the wealth will flow over into the lesser wealthy neighborhood nearby so in 5-10 years it would appreciate a significant amount.
2. Time on Market For Comparative Properties
If an apartment is on the market for a low amount of time and a house gets sold quickly, these are signs that the area is growing in wealth. If new residents are continually desiring to move in then they will continuously be putting more money back in the market to the local businesses and the housing market will continue to go up. Another metric to look at for confirming your belief for investing in the town is that the sales price of similar houses go over the asking price.
3. High Rental Income Compared Your Living Quarters
It is helpful if the parts of the house you are renting out are a higher ratio in rent than your living quarters. This has to do a little with comfortability vs profitability in the sense that it is your opinion on what you want to do for the outcome of your house hacking Journey (rent just a room out, the whole second floor, the whole 2nd unit apartment, just a garage, etc.). To help with the numbers to work in your favor let’s take a duplex for an example since those are easier to come by in the multifamily type of houses. Let us say it is a 4 bed 3 bath where one unit is 1 bed 1 bath and the other is a 3 bed 2 bath. In some markets, a 3 bed 2 bath is 85% more than a 1 bed 1 bath. This example gives you more cash flow if you live in the 1-bed unit and rent out the 3 bedroom unit. It is good to have multiple entrances for the building or units, multiple bathrooms, a driveway, a garage(s), an opportunity for additions or other ways to increase value (bedrooms or another unit) and many other value add options.
4. A Below Market Property To Live In
People always say I can’t buy at this time because prices are too high. In reality when looking at houses if the house is profitable, below sold prices for most comparable houses in the area, and have the opportunity to add rental/overall value then it is a GREAT DEAL. Typically these below market value properties need some sweat equity placed into it or some extra construction to be done. As an example, some houses typically go below market value if it is an estate sale with the seller wanting a quick sale when there is a noticeable structural problem or tenant challenges. The value behind below market properties is after you fix the problem that is causing the property to be sold lower than comparable houses the property will be of value to those comparable houses resulting in built-up equity in your pocket.
In conclusion
Always make sure your numbers are accurate, the investment is a long term mindset, and you take precautions. Look around the location and make sure the location is getting built up in some capacity, comparable houses going up in value, properties are sold quickly, there is more to rent out than live in, and property is below market.
