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SaintsTiger
Member since Oct 2014
77 posts

Rent Hacking Plan, Help Me Evaluate
Here's my plan: Rent a nice 2 - 3 bedroom house in New Orleans, in a desirable neighborhood, and rent out the extra room(s) to carefully screened professional type roommates.

Hypothetical Numbers for 2 bedroom house:

Cash Outlay:
$1,500 deposit
$4,500 (3 months rent set aside as cushion in case of vacancies)
$1,500 for furniture purchase

Income
Charge roommate $900/month + utility share + a security deposit. From their standpoint they get a turnkey place, and more square footage for their money compared to renting a 1 bedroom.

This would keep my monthly rent payment down to $600. If I did this with a 3 bedroom house that rented for, say, $1,800 my housing payment would be 0, though there would be a risk of double vacancy.

Seems simple enough, but there could be something I'm overlooking. Thoughts?


iAmBatman
USA Fan
The Batcave
Member since Mar 2011
9202 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

Seems simple enough, but there could be something I'm overlooking. Thoughts?



quote:

rent out the extra room(s) to carefully screened professional type roommates.



quote:

in New Orleans


good luck


SaintsTiger
Member since Oct 2014
77 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

good luck


Thank you!


MrJimBeam
New Orleans Saints Fan
Member since Apr 2009
3429 posts

re: Rent Hacking Plan, Help Me Evaluate
What would happen if you had to pay for 6 months without roommates? Would you be able to afford it? Is this an area people really want to live? Single/Engaged/Married? I'm guessing single, but you never know Do you know what you qualify for?


lighter345
New Orleans Pelicans Fan
Member since Jan 2009
11359 posts
 Online 

re: Rent Hacking Plan, Help Me Evaluate
Do you have a network on friends you would potentially rent to or are you just hoping to find people on Craigslist? Are you near Tulane/Loyola? A lot of young professionals don’t want to live with a random dude even if it’s a solid house. Finding the ones that do is also difficult. Go look at the housing wanted ads on Craigslist for Nola to see what I mean.


SaintsTiger
Member since Oct 2014
77 posts

re: Rent Hacking Plan, Help Me Evaluate
I got the idea from Facebook marketplace while searching for regular rentals. All of the good roommate ads seem to go very quickly. Search "roommate" on there and you will see. I probably wouldn't post anything on Craigslist. To mitigate the risk I'd rent a house in a high demand area. I do have a network of friends but wouldn't rely on that; hence the Facebook strategy.
This post was edited on 11/22 at 2:32 pm


makersmark1
Auburn Fan
earth
Member since Oct 2011
7676 posts

re: Rent Hacking Plan, Help Me Evaluate
Your lease would have to allow a sublease.

I’m not sure that is common.



SaintsTiger
Member since Oct 2014
77 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

What would happen if you had to pay for 6 months without roommates? Would you be able to afford it? Is this an area people really want to live? Single/Engaged/Married? I'm guessing single, but you never know Do you know what you qualify for?


Single, in my 30s. Probably would qualify for up to $2k/month or so. I'm self employed and need to do this year's accounting before knowing exactly what I'd qualify for. As far as vacancy risk, I'd try to mitigate that by getting a nice place in a high demand area. If I don't house hack I'd pay up to $1,200/month for a 1 bedroom. So every 2 months where I'm only out of pocket $600 house hacking I'd save $1,200, making the 3rd month a wash. So if the extra room is only rented out for 8 months out of 12 I would break even. Then I could also bring in revenue by allowing shorter term renters through Airbnb or whatever for a higher rate.


SaintsTiger
Member since Oct 2014
77 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

Your lease would have to allow a sublease.


Good point. I'd be straightforward with the landlord and take full responsibility for the lease term. I think roommates are pretty common.


LSUFanHouston
LSU Fan
NOLA
Member since Jul 2009
18313 posts

re: Rent Hacking Plan, Help Me Evaluate
Many residential leases specifically forbid a sublease. That's your biggest problem.

I also don't know you are going to furnish a guest bedroom for $1500 unless you are using nothing but IKEA crap, and if you do that, your roomies aren't going to be that high quality.

If you do find high quality professional roommates, they are going to see that they are being taken for a ride.

Roommates are common but usually on the lease.

Your plan would work a lot better if you buy a house and lease out rooms.
This post was edited on 11/22 at 3:00 pm


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kennypowers816
LSU Fan
New Orleans
Member since Jan 2010
2431 posts

re: Rent Hacking Plan, Help Me Evaluate
Can you stop calling it rent hacking and start calling it subleasing? That's all you're doing. There's no hack about it.

You're just taking the responsibility and liability of a lease agreement for a full property and subleasing part of the property to a third party. The concept has been around much longer than hacking.

Typically, a large multi-unit property with a real property management office will not allow subletting. And if I owned a property, I'd probably avoid a self-employed young adult who "needs to do this year's accounting to know what he/she would qualify for." Frankly, I'm not sure I know what "qualify for" means when it comes to a private lease.

But you seem excited about the idea... so good luck!


cgrand
New Orleans Pelicans Fan
HAMMOND
Member since Oct 2009
19082 posts

re: Rent Hacking Plan, Help Me Evaluate
every resident is going to need to be on the lease


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SaintsTiger
Member since Oct 2014
77 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

Can you stop calling it rent hacking and start calling it subleasing? That's all you're doing. There's no hack about it.

You're just taking the responsibility and liability of a lease agreement for a full property and subleasing part of the property to a third party. The concept has been around much longer than hacking.

Typically, a large multi-unit property with a real property management office will not allow subletting. And if I owned a property, I'd probably avoid a self-employed young adult who "needs to do this year's accounting to know what he/she would qualify for." Frankly, I'm not sure I know what "qualify for" means when it comes to a private lease.


My business numbers and revenues are good sir as they have been for the last 7 years. And I've never had a problem renting before. I was responding to another poster who asked if I knew what I'd qualify for. That is based on your income.

I'm cross-posting this on a real estate forum to get more helpful responses. Have a nice day, and enjoy your weekend!
This post was edited on 11/22 at 3:26 pm


kennypowers816
LSU Fan
New Orleans
Member since Jan 2010
2431 posts

re: Rent Hacking Plan, Help Me Evaluate
That's great for you, and I am not doubting it. I'm just telling you that if I owned a rental property and was looking at prospective tenants, I'm looking for someone with a consistent, reliable and predicable income to protect myself.

While it is certainly possible for a single, self-employed person to meet that criteria, I'd have to consider that as part of the application process. Then add on the fact that you want to sublease to folks on facebook, and I'm probably looking for another prospective tenant personally.

Just trying to help you evaluate the situation as you asked.


buckeye_vol
Ohio State Fan
Member since Jul 2014
32212 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

Here's my plan: Rent a nice 2 - 3 bedroom house in New Orleans, in a desirable neighborhood, and rent out the extra room(s) to carefully screened professional type roommates.
Unless it's essentially a necessity (e.g., super expensive city, really short-term need immediately, no other place to rent), I would never choose to share a space with someone I don't know, unless it was maybe a super good deal (which would raise red flags probably).

So what is even the likelihood you would find a person who is willing to pay 60% of the rent share with a random person because they are providing some cheap furniture. Not to mention you have to ensure someone passes your screening and that person isn't a False Positive? And how many months do you expect to fill that room, and how often will you get turnover (more work)?

Personally, if I was in your shoes and had to have a roommate, I would rather pay an extra $150 a month in rent, which can be cover 10 months worth of the furniture, and save/invest the remaining $4,500.

Not to mention, that will be counted as rental income, and besides things like $1,500 in upfront expenses to deduct (if solely for the rental portion), which is $125, you'll owe taxes on the "profit" (after 20% QBI deduction), so that $150 you could potentially gain, could end up closer to $100.
This post was edited on 11/22 at 4:01 pm


SaintsTiger
Member since Oct 2014
77 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

That's great for you, and I am not doubting it. I'm just telling you that if I owned a rental property and was looking at prospective tenants, I'm looking for someone with a consistent, reliable and predicable income to protect myself.

While it is certainly possible for a single, self-employed person to meet that criteria, I'd have to consider that as part of the application process. Then add on the fact that you want to sublease to folks on facebook, and I'm probably looking for another prospective tenant personally.

Just trying to help you evaluate the situation as you asked.


You indicated I wouldn't be likely to qualify to rent housing simply because I'm self-employed. You questioned what "qualify for" meant, when I was responding to another poster's words. For your information, typically, the rental payment should be no more than 1/3 of the renter's take home pay.

Now you're indicating that I don't have consistent, reliable income. You have no way of knowing that. And in fact, the assumption is incorrect. Also you're telling me what a large, multi-family housing complex is likely to require. My plan doesn't have anything to do with a complex as I said in the post. Finally, you had an unhelpful aside about the difference (or lack thereof) between house hacking and subletting.
This post was edited on 11/22 at 3:42 pm


buckeye_vol
Ohio State Fan
Member since Jul 2014
32212 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

Now you're indicating that I don't have consistent, reliable income. You have no way of knowing that. And in fact, the assumption is incorrect.
It sounds like you're more like full-time uber driver though, than anything else.

Because other than a mobile-type job, I can't think many other self-employment situations where you would not be making enough where you would to set-up that arrangement when instead turning a portion of it into a home office instead, and be able to claim that portion of the expenses on one's taxes (including those darn self-employment taxes).
quote:

house hacking and subletting.
You can call it whatever you want, but you're trying to sublet your apartment and will either have to find a place that allow it, you're going to be taking on a lot of risk to do it.

Seems like a lot of time, energy, upfront costs, and risks, when you could find ways to build your business and/or just rent a studio apartment, typically the cheapest option.
This post was edited on 11/22 at 4:39 pm


SaintsTiger
Member since Oct 2014
77 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

It sounds like you're more like full-time uber driver though, than anything else.

Because other than a mobile-type job, I can't think many other self-employment situations where you would not be making enough where you would to set-up that arrangement when instead turning a portion of it into a home office instead, and be able to claim that portion of the expenses on one's taxes (including those darn self-employment taxes).


I started out working from home in the second bedroom, and did take the home office deduction for several years. Now I keep a regular office, although I am able to work remotely. Since Trump's tax reforms, though, the home office deduction is a thing of the past. Thanks for sharing your opinion, even if slightly uninformed.

I do not work for Uber, though there is nothing wrong with that.


SaintsTiger
Member since Oct 2014
77 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

Unless it's essentially a necessity (e.g., super expensive city, really short-term need immediately, no other place to rent), I would never choose to share a space with someone I don't know, unless it was maybe a super good deal (which would raise red flags probably).

So what is even the likelihood you would find a person who is willing to pay 60% of the rent share with a random person because they are providing some cheap furniture. Not to mention you have to ensure someone passes your screening and that person isn't a False Positive? And how many months do you expect to fill that room, and how often will you get turnover (more work)?

Personally, if I was in your shoes and had to have a roommate, I would rather pay an extra $150 a month in rent, which can be cover 10 months worth of the furniture, and save/invest the remaining $4,500.

Not to mention, that will be counted as rental income, and besides things like $1,500 in upfront expenses to deduct (if solely for the rental portion), which is $125, you'll owe taxes on the "profit" (after 20% QBI deduction), so that $150 you could potentially gain, could end up closer to $100.


This is some good food for thought, thanks. At the same time having a roommate to help share costs is a pretty common thing. There are a few ways to look at this, I know.


buckeye_vol
Ohio State Fan
Member since Jul 2014
32212 posts

re: Rent Hacking Plan, Help Me Evaluate
quote:

Now I keep a regular office, although I am able to work remotely.
So you are spending money on a rental space for your business, but trying to save a few hundred bucks in month for your resident rental, trying to come up with some risky "house hacking scenario?"
quote:

Since Trump's tax reforms, though, the home office deduction is a thing of the past. Thanks for sharing your opinion, even if slightly uninformed.
Well you better tell the IRS.

Business Use of Your Home
quote:

For use in preparing 2018 Returns
quote:

Your home office will qualify as your principal place of business if you meet the following requirements.
quote:

You use it exclusively and regularly for administrative or management activities of your trade or business.

You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.
I'm not surprised that you would not know this though.
This post was edited on 11/22 at 4:53 pm


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