House hacking with a tight cash flow

[Cameron C.]

Hey BP,

So you may have seen some of my other posts on here recently but I'm currently close to a deal with my current landlord to purchase my single-family house in the Southside of Pittsburgh.  This is an extremely strong rental area, my properties has many additional high end amenities that comparable properties do not and I do not foresee the rental landscape changing much after I move in the coming years.  Myself and my roommates will definitely be there for the next 12-18 months and I will be using their rent as income to cover the mortgage etc.

I have put together many models, all of which cash flow in this scenario but aren't the eye popping number you may sometimes see on a stellar deal.  I continue to rationalize pulling the trigger to myself because of the area that this property is and should be relatively safe for that fact.  The University of Pittsburgh, Duquesne, and Carnegie Mellon are not going anytime soon and I feel more comfortable getting my hands on a turnkey property in a proven area for a premium rather than rolling the dice in a risky up and coming community.  

That said, I'm still looking for experienced investors to shoot holes in my plans. In my current models, counting my current rent as income I'd reinvest in the property, I would cashflow at least $150/month when conservatively escrowing 10% for vacancy, 10% for CapEx, and 10% for a future property management company. In many cases, if you were to reduce or eliminate those figures, the monthly cash flow could be anywhere upwards of $600 monthly.

This would be my first deal and there are obvious advantages to house hacking a place I currently live in and can guarantee occupancy for the next 18 months. That said, the cash flow numbers are not phenomenal but I am confident that I would be getting the property around 10% below what it would currently sell for on the market (based on my MLS sold comps within the last 3 months) and would be able to play landlord in a few years if need be. The idea of jumping in for a turnkey property around 300k in a great area still scares me a little but based on all of my numbers I think it will be profitable going forward.

Any thoughts or suggestions from the BP family as it relates to calming my fears for not solely looking at cash flow numbers and evaluating a deal in other respects.  Thanks!

Cam