House Hacking Question

[Derick Hanna]

Me and my wife used the rental calculator on a Triplex. We first ran the numbers as if we would be renting out all 3 units to see if the property was a good investment. All the numbers were solid and we had a positive cash flow of $308. We want to use the VA loan, which means we need to live in the largest unit (we have kids). House hacking eliminates 1600 dollars worth of rent and leaves us with a $ -955 cash flow. When I look at that, it appears like that just means our "rent" is 955 dollars with utilities and everything already taken care of. Am I wrong about this? is it really that simple? We only plan on "hacking" for the least amount of time that is required to satisfy the loan. Pretty nervous I might make a mistake since this is our first property.

[Randy Mattila]

I have house-hacked two fourplexes now and am currently living in the second house hack.  Take Michael Noto's advice and make sure you get the location correct.  In my opinion is is FAR more important to make sure you are buying in the right area than to get the most cashflow you possibly can.  Buying in a great location will help your property appreciate much better and your rents will grow more quickly.  Most importantly, having a great location will make it significantly easier to find good residents to rent your unit.  My first fourplex was in a C class area.  It took me one to two months to find a resident that met my criteria.  I went though hundreds of applications and only found a couple that met our criteria.  Most of the good ones didn't want to live in my neighborhood and therefore I was left with the high maintenance residents that couldn't get approved for a rental in a better area.  Almost all of my headaches were due to buying in a C class area.  A year and a half ago I found an off market deal on two B class fourplexes in a really great area.  I was able to sell my C class building and 1031 into the new properties.  My wife, daughter and I are house hacking in one and renting out the other 7 units.  Owning and renting these eight B class units is 1/4 of the work of owning and renting the four C class units.  We had our 1st vacancy in the new units last month.  We cleaned up the unit and listed it for rent above market just to see what happened.  We had a signed contract with a great resident that fully met our criteria within 9 hours of listing the unit for rent.  In DECEMBER.  Through experience I found the 3 BEST ways to make money in real estate.  Location, Location, Location.