House Hacking/First Property

[Joe A Warner]

Hello BP,

After a few years of "Analysis Paralysis", I finally have my first property under contract with a closing date in May. The house is a 3bd/2bth SFR (unit 1) with a separate 2bd/1bth house (unit 2) behind it on the same lot. Each property has its own address and separate gas and electric meters. The ideal plan would be to live in the smaller house out back while renting out the bigger one, but plan to purchase another property next while fully renting out this one. So the numbers below will assume it is a full on rental, since that is my final goal with this property. For now it will be my primary residence.

The Deal:

Purchase Price: $86,000

Financing: 30yr conventional loan

PITI (with PMI): $635/mo

Total Cash into deal: $7,380

Rent:

- Unit 1: $900

- Unit 2: $400

- Total: $1,300/mo

Total cash flow including non-cash expenses (vacancy, repairs, capex all at 7% gross rent) is $180 per month. I will also be able to add $50/mo. once my PMI drops off the loan = $230/mo.

Cash on Cash ROI: 26.06%

Even if I don't rent this property out and live in it with no tenants, I am already reducing my monthly rent payment that I have now by quite a lot.

Also, wanted to note that the main house is recently renovated with stainless steel appliances, granite countertops, custom bathrooms etc... A little too much for a rental in my opinion, but doesn't bother me any since the seller did all that before listing.

This would be my first ever deal...thoughts??

[Jesse Lynch]

@Joe A Warner - that seriously sounds like an awesome deal!  I'd caution to take it a little bit slow in this COVID environment.  That house hack sounds like a win, no matter what, but to take on several more, with the future of home prices might be more of a risk that it's worth at this strange moment in history.  It's hard and even silly to predict the future of the market at any time, but there is a chance that values will drop a bit, allowing you to get more for your money in a short amount of time!

Glad you got past the analysis paralysis though, man!  I'd say close on this one, get it occupied, and then look to your next deal!