Ok to sacrifice cash flow for Owner Occupied?

Question

Hi Everyone,

My husband and I are looking to start investing in real estate, and we'd like to start with a house hack.  We'd plan to live in this property for 2-3 years while we build equity and plan our next move.  We recently looked a duplex that we could really see ourselves living in, but since it's only a duplex, we'd have to pay part of the monthly expenses to live there.  Some other properties we've looked at (3-5 units) would allow us to live for free, but we honestly couldn't see ourselves living there.  We both work full time, so I think the downside I need to consider would be a slow down to our ability to save and calculating the opportunity cost of our savings.

The duplex would have positive cash flow once we move out and rent both sides.  Thoughts on a short term sacrifice on cash flow to live more comfortably?  Or should we wait for a property with more units to come on the market?  What am I not considering?

Appreciate the insight!

Doug Shapiro · Answer

Hi @Nichole Landow,

I've ran into this issue many times before, and my decision has always been to buy the best investment possible for what I am willing to sacrifice.  In other words, this is a personal decision for you and your husband.  What can help make your decision easier is to list out all the pros and cons on flashcards for each purchase option (desirable duplex vs other investment) and to order each in terms of importance.  It sounds elementary but it actually really helps break everything down.

For example, the pros list for the desirable duplex may look something like this:

• Safe location
• Updated kitchen
• Nice views
• Location proximity to work
• Washer/dryer in unit
• Dishwasher
• Etc.

If you don't care to do the exercise above, then my short advice is to buy the duplex that you like.  You literally said that you couldn't picture yourselves living in the other 3-5 unit properties.  If you've been following the real estate market in your area, then you should have a good idea on what is a good deal.  You can ALWAYS wait for something better to come onto the market, but then you may find yourself waiting forever.

Rachel H. · Answer

@Nichole Landow Since you plan to live there, definitely go with the property and area your feel comfortable with. Good luck!!