Renting vs. Househack in Dallas, Request for Advice

[James McCreary]

Hello BP Community!

This is my very first post, so I hope this generates some momentum on my end to begin becoming active on here. After some research on my part, I’d like to solicit the feedback of more experienced folks on what the better plan of action would be. I am currently deciding on whether to “house hack” (buy a home…rent out the remaining rooms that I do not occupy) vs. continue renting in the Dallas area.

I’ve reached out to a few individuals, read some posts, and performed research.

Some Context

a. Age: 24, single. Not getting married anytime soon.

b. Income: $70,000, work in Irving

c. Current rent: $1,100/mo until June 15, 2018, live in Addison

d. Currently invested in a commercial real estate fund with a local successful investor (current returns approximately 8% CoC, 15% annualized upon exit in 7 years) and also running my own company on the side of my day job. My company currently has yet to make revenue.

e. Objective: Put my "rent dollars" to more effective use, and continue investing in commercial real estate as soon as possible, even if that means going the SFR route for a bit

f. Current savings $9,000

Property Analysis

a. For my income, some “pre-qualification” tools result in a $250K cap, give or take

b. For my price point, I’m looking at The Colony, Carrolton, and far west Plano

c. Running the BP Rental calculator on one of the properties I found yielded the following (summarized, and some of the parameters can be tweaked.):

i. Purchase Price: $258,000

ii. Down Payment: 3.5%

iii. Loan Interest: Fixed, 30-year at 4.3%

iv. PITI: $1,830/mo

v. Expenses (50% rule): $800

vi. Rental Income: $1,600 ($800/bedroom)

vii. BP Calculator doesn’t seem like I’d cash flow really at all until year 10-12+

viii. I performed a second analysis using 20% down (this would be winter '18 onwards, so I appreciated the house to $265,000, and which brought the PITI down to $1,600.

IX. Preferences: I really don’t care about “nice” areas or schools. I’m a rather go-by-the-numbers guy, if I know that it is worth it financially. Ideally, I’d be close to somewhere more outdoors friendly (I’m a runner), but I know that if I eventually want to sale, I need to take into account others’ different tastes than mine.

My thoughts

a. Dallas is going to appreciate and become a primary market, no downturn coming.

b. Continuing to rent resets for inflation every lease renewal, along with the steep hikes (my Addison apt. increased it 6% last year, I negotiated it to 4%)

c. I need to decide in the next few days of whether to put my savings into the real estate fund or save it for a down payment, but I do not want to buy in the summer months as that is a peak time of year

d. Continuing to rent, I can continue to pump funds into the real estate fund and remain “flexible” geographically

I’ll leave it at that for now and can certainly elaborate on anything. I'll be watching this post like a hawk. If I’m completely missing the mark on something or it is such a clear answer at this point for YES or NO to go with purchasing a house, please let me know. Feel free to criticize as much as necessary, I’m all about improvement. You won’t hurt my feelings!

Thank you!

Sincerely,

James