HouseHack vs BRRRR for first time.

[Alex Pepe]

Hi Guys,

I've spoken with an investor friendly realtor here in my area about helping me find a house hack come July when my lease ends. I currently am paying 1200/month in rent. He says I should expect to still pay around 700/month HH'ing a 4BR house. If I used FHA on around a 350K home, Id be looking at 25-30k out of pocket, to save around 6k/year.

My question:

I'm not sure there is enough margin on 6k/year to justify a HH. Maintenance/repairs could easily erase that 6k and go beyond. If I could get closer to 0-300/month in mortgage payment, then perhaps a HH has more merit to it. Otherwise I'm of the mind to save 6-12 months longer and go into a BRRRR for my first deal.

Very curious to see what other more experienced minds think.  I appreciate the time to respond to my thoughts.

[Katherine Serrell]

You have to consider the other benefits to househacking besides saving money on rent. In this example, you would be saving much more than 6k/year when you factor in the tax deductions you can take for househacking, appreciation of the home, principal pay down, as well as the learning experience of finding, buying, and presumably managing the property. Renting is literally throwing thousands of dollars down the drain and Not getting a reduction in living expenses, tax benefits, principal pay down, appreciation, and experience. 

If you want to increase the bottom line and your city, neighborhood, etc allows for it, you can househack by the room on Airbnb, Furnished Finder, etc with short term or mid term rentals to significantly increase your cashflow if you want to cashflow or at the least eliminate your living expenses. I am in a pricey market (Raleigh) and have managed to do this on 3 houses I have househacked over the past 3 years using USDA, FHA, and conventional loans. If you buy right, you can make it work.

BRRR's are tricky in this market (especially when just starting out) with rising costs of labor and materials coupled with housing prices falling...can be extremely risky if you dont have any experience, a solid background in a related field, team, etc and as a result funding can be much harder to secure. Not saying it cant be done but you dont want your first deal to be a bad deal or even an "okay" deal that is so much headache that it completely kills your motivation to do the next one.