When running numbers for a house hack

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When running numbers for a house hack

Tim Duffey
Member since 2021 · 12 posts · 6 votes

Hi guys, 

I am searching for a house hack in my area. When I run the numbers to see if it cash flows, should I run it while I am living there or if I should run it like if I wasn't moving there, (like when I move out eventually). Because I have ran numbers on properties without me living on the property and none are good cash flowing properties initially.

Also, for my 1st rental property and house hack, do you guys focus a lot on cash flow by the way? I've been told for a house hack and me living there for a few years, it is more of a long term growth. Which my CoC would be positive in 5-10 years. But would start off in the negatives pretty well. Curious if I should have a different mindset when house hacking on my CoC, ROI, and cashflow. I like to live in a good neighborhood where crime is low which where I live my cashflow will suffer. Seeking any advice an have with their previous house hack and how it worked out for them with there cashflow, ROI, and CoC. Thank you.

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Sebastian Hernandez
Contractor · Morris County, NJ · Member since 2020 · 186 posts · 91 votes
4y

Hey Tim, I am very familiar with house hacking as I’ve done it myself. My suggestion is that you run your numbers with both scenarios. You want to make sure that once you move out and both units are rented, the house is generating cash-flow. I am very simple with this stuff, I just want my rentals to generate at least $700 in pure cash flow. 

Now, you should also run the numbers while you live in the property. You most likely will not cashflow at all. However, you will see that the tenants rent should cover the majority of your mortgage. The idea is that your “rent payment” payment will be significantly lower than if you were actually renting a house. For example, if you house hack, you contribute $700 towards the mortgage. If you rent, you pay $1,900. Thus house hacking is saving you $1,200 per month!

Hope this makes sense! 

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  • Sebastian Hernandez
    Contractor · Morris County, NJ · Member since 2020 · 186 posts · 91 votes
    4y

    Hey Tim, I am very familiar with house hacking as I’ve done it myself. My suggestion is that you run your numbers with both scenarios. You want to make sure that once you move out and both units are rented, the house is generating cash-flow. I am very simple with this stuff, I just want my rentals to generate at least $700 in pure cash flow. 

    Now, you should also run the numbers while you live in the property. You most likely will not cashflow at all. However, you will see that the tenants rent should cover the majority of your mortgage. The idea is that your “rent payment” payment will be significantly lower than if you were actually renting a house. For example, if you house hack, you contribute $700 towards the mortgage. If you rent, you pay $1,900. Thus house hacking is saving you $1,200 per month!

    Hope this makes sense! 

    1Reply
  • Tim Duffey
    OP
    Member since 2021 · 12 posts · 6 votes
    4y
    Quote from @Sebastian Hernandez:

    Hey Tim, I am very familiar with house hacking as I’ve done it myself. My suggestion is that you run your numbers with both scenarios. You want to make sure that once you move out and both units are rented, the house is generating cash-flow. I am very simple with this stuff, I just want my rentals to generate at least $700 in pure cash flow. 

    Now, you should also run the numbers while you live in the property. You most likely will not cashflow at all. However, you will see that the tenants rent should cover the majority of your mortgage. The idea is that your “rent payment” payment will be significantly lower than if you were actually renting a house. For example, if you house hack, you contribute $700 towards the mortgage. If you rent, you pay $1,900. Thus house hacking is saving you $1,200 per month!

    Hope this makes sense! 


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  • Tim Duffey
    OP
    Member since 2021 · 12 posts · 6 votes
    4y
    Quote from @Tim Duffey: Thank you Sebastian for the advice! Just want to make sure though. Should my rent while living in the house only cover most of my mortgage alone or all my expenses together? And if the property doesn’t cash flow for a couple years after I move out, is that an investment worth looking into? Lets say it is in a nice area, Class B. So hoping to increase rent overtime and have equity in appreciation as well? Curious as that is the state I am in with my local market
    Quote from @Sebastian Hernandez:

    Hey Tim, I am very familiar with house hacking as I’ve done it myself. My suggestion is that you run your numbers with both scenarios. You want to make sure that once you move out and both units are rented, the house is generating cash-flow. I am very simple with this stuff, I just want my rentals to generate at least $700 in pure cash flow. 

    Now, you should also run the numbers while you live in the property. You most likely will not cashflow at all. However, you will see that the tenants rent should cover the majority of your mortgage. The idea is that your “rent payment” payment will be significantly lower than if you were actually renting a house. For example, if you house hack, you contribute $700 towards the mortgage. If you rent, you pay $1,900. Thus house hacking is saving you $1,200 per month!

    Hope this makes sense! 



    0Reply
  • Thomas Goedecke
    Rental Property Investor · Denton, TX · Member since 2018 · 5 posts · 0 votes
    4y

    If it doesn’t cash flow after you move out, it’s not a good deal.

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  • Tim Duffey
    OP
    Member since 2021 · 12 posts · 6 votes
    4y
    Quote from @Thomas Goedecke:

    If it doesn’t cash flow after you move out, it’s not a good deal.


     Sounds good. And Thomas just to clarify, would you expect it to cashflow right when I move out? Or would you wait a year or two to cash flow positive after I move out. Because some properties I have been seeing will cash flow positively in 5 years after purchase. So just want to make sure I have the right mindset of when to make it cashflow positively. 

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  • Sebastian Hernandez
    Contractor · Morris County, NJ · Member since 2020 · 186 posts · 91 votes
    4y

    I agree, if it does not cash-flow after you move out, I do not think it will be a good investment starting out. 

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