Cashflow or Appreciation for first house hack

Cashflow or Appreciation for first house hack

New to Real Estate · Salem, OR · Member since 2023 · 13 posts · 11 votes

Hi my names Seth and I'm currently a high school senior and am saving up  and learning as much as I can to house hack in about a year and a half in my sophomore year of college at the University of Oregon. So far in analyzing properties in the Eugene market I've found that cashflow can be tough to find, however I have found 1 or 2 properties that would have decent cashflow potential around 300,000 and it's a 5,2 with 1740sqft and it's in a b- area but would require a good amount of rehab, most likely new floors, potentially  some wall repairs and a new paintjob, plus other small cosmetic repairs. This might create some solid forced appreciation  and many other hoses around it are valued roughly around 400,000. I have found a second property for about 425,000 that is an a better area than the previous house as it's in an a- area also a 5,2 with 2200 sqft, this property would require far less rehab than the first property, however it would likely not cashflow nearly as well, but would likely have far better appreciation due to the area. My question: is it better to focus on appreciation or cashflow when buying your first house hacking as a 19-20 year old and do you think that the rehab work of the first house would be too much as far as extra cost on top of the roughly 10,000 down payment and the lack of experience I have in the real estate game. By the time I'm ready to buy in college I'll likely have 25,000-30,000 dollars to invest and I'll have the monthly rent from my parents to live in Eugene for college  that I could use to help me if I was cash flow negative when house hacking. Thoughts?

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Dan GuentherBusiness Member
Real Estate Agent · Longmont, CO · Member since 2019 · 548 posts · 271 votes
3y

@Seth Michael Carp - I love the hustle Seth! You'll hear this over and over but I wish I started that young. I spent 5 years living in Portland and always had a good time down in Eugene! 

For your first house hack, one factor that a lot of people overlook is lowering or fully eliminating the current rent that you would be paying while renting. Even if you end up cashflow negative out of the gate you are still building equity, paying down your own loan (not someone else's), gaining investing experience, hopefully appreciation, and all of the tax benefits that come with it! 

If you haven't already, look into some Meetups around campus and see if you can connect with other investors. Let me know if you want to talk a bit more about some potential options there in Eugene, happy to help out! 

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  • Real Estate Agent · Boston, MA · Member since 2016 · 450 posts · 214 votes
    3y

    @Seth Michael Carp, it's amazing to see how motivated and excited you are about real estate as a high school student. You're going to do big things!

    People are probably going to say to go for cash flow and appreciation, which makes sense. However, some markets cash flow better than others just as some appreciate better than others. 

    In a college market like Eugene, I'm unsure what the appreciation looks like, but I'd be pretty certain that you could rent by the room and cashflow with 5 bedrooms as you described. How have you been analyzing properties?

  • Real Estate Agent · Member since 2019 · 143 posts · 74 votes
    3y

    Hi Seth, it's great that you're already thinking about house hacking at such a young age and doing your research. Here are some tips that might help you:

    1. Cashflow vs. Appreciation: When it comes to your first house hack, I would suggest focusing on cash flow rather than appreciation. While appreciation can be great in the long run, it's harder to predict and relies heavily on market conditions. Cash flow, on the other hand, is something you can control more directly and will help you pay your bills and build your savings. Look for properties that can generate positive cash flow, even if it's not a huge amount.
    2. Property analysis: It's important to conduct a thorough analysis of any property you're considering buying, including estimating repair costs and potential rental income. If the first property you're looking at requires a significant amount of rehab work, you need to be sure you can afford those costs and that you have the skills or resources to handle the repairs. It's also important to factor in the potential for unexpected repairs or vacancies, which can eat into your profits.
    3. Financing: Since you're a college student, you may not have a long credit history or steady income, which can make it more challenging to get financing. It's important to explore your options and find a lender that is willing to work with you. You might consider applying for an FHA loan, which has lower down payment requirements and is often easier to qualify for than conventional loans.
    4. Location: The location of your property is also an important consideration. While the second property you're looking at may have better appreciation potential due to its location, it's important to also consider the rental demand in the area. A property in a less desirable location might generate better cash flow if there is a high demand for rental properties in the area.
    5. House hacking: Finally, make sure you have a solid plan for how you will house hack the property. If you're planning to rent out rooms to other college students, for example, you need to be sure you can manage the property effectively and that you have a plan in place for screening tenants and handling any issues that arise.

    Overall, it's important to approach house hacking with a realistic and cautious mindset, especially since you're still young and relatively new to the real estate game. With the right research and preparation, however, you can find a property that meets your goals and sets you up for long-term success.

  • Dan GuentherBusiness Member
    Real Estate Agent · Longmont, CO · Member since 2019 · 548 posts · 271 votes
    3y

    @Seth Michael Carp - I love the hustle Seth! You'll hear this over and over but I wish I started that young. I spent 5 years living in Portland and always had a good time down in Eugene! 

    For your first house hack, one factor that a lot of people overlook is lowering or fully eliminating the current rent that you would be paying while renting. Even if you end up cashflow negative out of the gate you are still building equity, paying down your own loan (not someone else's), gaining investing experience, hopefully appreciation, and all of the tax benefits that come with it! 

    If you haven't already, look into some Meetups around campus and see if you can connect with other investors. Let me know if you want to talk a bit more about some potential options there in Eugene, happy to help out! 

  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    3y

    First house, middle house, last house, negative CF is never good, and never acceptable...regardless of the appreciation.

    First house, middle house or last house, little or no appreciation is never good, and never acceptable...regardless of the cash flow.

    I laugh everytime the question of one or the other comes up.  There is no question.  Either one without the other is a non starter,...."check please".

  • Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Cash flow. 

  • Realtor · Sacramento, CA · Member since 2019 · 242 posts · 152 votes
    3y

    Hey Seth! That is so exciting that you're getting interested in this at such a young age! I'm actually from Salem Oregon (Go Sprague Olympians lol) so it's always cool to see my hometown pop up in here. My husband went to OSU and always commented about how he wished he had bought a house and rented the rooms to his friends - because they all shared houses all the time anyway.

    I think getting your foot in the door and buying a house where you can rent out the bedrooms is a smart move if you can cover the difference between rents and all of your bills (if there is anything left over).

    We own a 6 bedroom house and rent out the rooms so if you need any help once you get started please feel free to shoot me a message and I'd love to help!

  • Real Estate Broker · Portland, OR · Member since 2018 · 126 posts · 71 votes
    3y

    I agree - cash flow. Eugene is an inventory short market and they don't allow a lot of new construction, so if you hold it long enough it will appreciate. House hack it and rent it out by the room and you should be able to make it cash flow AND lower your monthly rent payments too. Good luck. Love to see the hustle.

  • Realtor · Athens, GA · Member since 2023 · 201 posts · 104 votes
    3y

    Based on the current market and future expectations for rates and global/macro economic conditions I would say cash flow. Appreciation is never a guarantee and most experts think the time of rapid appreciation is over, so if you don't cash flow each month you might wait 5 years for minimal appreciation and a break even, not a good start to your journey.

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