House Hacking Query: Do I factor in my paying rent?

[Ken Alce]

Hi all! I'm brand new to this community and look forward to learning (and, in time, giving) as much as possible! I'm located out of Baltimore, MD. 

When running the numbers on a house hack opportunity, do you factor in how much you'll be "giving" in rent? I'm renting my apt. right now for $1700. I intend to move to a duplex and rent out the other unit. When I run the numbers do I factor in that I'm paying $1700? 

On one hand, I'm trying to take advantage the "live for free" (which presupposes that I'm not paying rent). On the other hand, when I run the numbers, unless I factor in a second rent (i.e., me), the numbers look terrible, leading me to suppose this means it's not a great deal.

What do you think?

[Seth Hochberg]

Yes, you do factor it in. There are two periods you need to consider: when you're living in one of the units and when you're are not.

If you're living in one of the units, with a duplex, you might cash flow negatively which sounds terrible, but it's huge if you consider how much money you're saving. As long as you're saving some $ for repairs and vacancy, this is fine. If all your expenses come out to $400 a month, that's still $1300 savings each month you get for buying a house. This is a good deal. If you're cash flowing negative $1400 a month and only saving $300, that doesn't seem worth the hassle. You determine for yourself how much monthly savings is worth buying the house.

The second scenario is if you intend to eventually rent out all units, then you run the numbers and make sure you think the place can cash flow positively.