House Hack Realization...

Real Estate Agent · Baton Rouge, LA · Member since 2019 · 84 posts · 33 votes

Hey so I was thinking about something the other day. I currently House Hack, using AirBNB (Yes Covid has disrupted it a bit), but Pre-Covid I was covering the mortgage +1000's. This equates to $2400 a month on average.

I got to thinking, I'm taking in $2400 a month and using it to pay for my mortgage and lifestyle, it's as if I have 12 doors at 200's a piece. If that is the case is it actually even necessary for me to pursue purchasing more real estate? I mean I'm looking all the time at potential deals, that will obviously add to my net worth if purchased properly. But if they only produce 1-200 a door, is it worth all the effort when I've virtually got 12 doors in the form of the house hack?

I hope that makes sense.

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Gregory SchwartzBusiness Member

Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes

@Brian Mackey some very good points have been made. I'd like to add to the equation by factoring in equity growth. On a 30 yr mortgage you pay down roughly 2-3% over the first few years plus, the icing on the cake, appreciation is on average 3-4%. Quick math

Lets look at a 200k home on a 30 year mortgage. Principal paydown of $2,500 and appreciation growth of $6,000 for a grand total of $8,500. So yes those additional properties might only cashflow $2,400 over the year but your net worth is going to grow by close to $11,000!

Cash flow is nice but equity growth is where you truly build wealth.

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
@Brian Mackey If it works for you (and it seems to), stick with it. Different people have different preferences. I wouldn't want to house hack as I like my space. I know others who are like you and making a lot of money-kudos to you.
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Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
I think you're missing something with your math. Normally, you would expect your cash flow per door to be after your mortgage expense. That means you should be looking at the $1,000 compared to the $200, not the $1000 + the mortgage. However, making this comparison is what leads many people to STRs versus traditional rentals. It's more work and more risk, but often more reward as well.
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Brian Mackey
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Real Estate Agent · Baton Rouge, LA · Member since 2019 · 84 posts · 33 votes
6y
@Joseph Cacciapaglia
I see what your saying. I’m guess I’m counting the Airbnb income as all my own considering it’s paying for my living. Whereas if I owned a remote Airbnb/traditional rental, my only ‘income’ would be the cashflow (not including mortgage pay down, appreciation, tax benefits), after expenses.
To get 2400’s at 200$ a door I would need 12 properties. These are low numbers that I’m just spitting out, but I would need to come up with downpayments for 12 properties, and only then would I get the 2400’s.
Is a successful house hack just as good as getting the 12 properties. It’s not a question that has a real answer I guess, I’m just kinda throwing it out there to see what others think.
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Account Closed
Rental Property Investor · Grove City, OH · Member since 2018 · 93 posts · 71 votes
6y
Since Airbnb has a higher potential income it inherently may have risks that a regular rental property would not have, so I would still pursue more properties if I were you so that if you need to shift that unit from Airbnb to a long term regular rental you will still have more potential income with other rentals. I dont think having one successful airbnb house - hack will do you justice in the long run if you are looking for $2,400 consistently. Maybe do a Regular househack thats a rental unit and not a short term rental next time to diversify.
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Natalie Schanne
Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Brian Mackey - House hacking is a great way to build wealth (very low owner interest rates, low money down). Roommates/Airbnb is also a great way to build wealth.
If you haven’t, read Craig Curelop and Scott Trench’s books and see if you can tweak your strategy. A common strategy is when you have a w2 job or easy way to get a loan, you buy a house with cheap financing, live there 1+ year then go get another house and rent out the first one. Then repeat. This way you can quickly build your portfolio with 3-4% debt and 5-20% down vs 4-6% debt and 20-35% down.
So you’ve figured out a better model that yields more money than $200/mo. If on average you’re making $1000 after all expenses including the implied (not cash) costs of property management and outsourcing any turnover (cleaning, getting supplies) if you handed it over to someone else, then great job. You want to compare apples to apples. The $100-200 number usually includes expected vacancy, 8-10% property management, 5-10% of rent in a reserve account for repairs like new roof or AC. So it looks smaller than the actual cash coming in from the property if you’re self managing, have low vacancy or haven’t had to do big repairs yet. Like you might get $2400 rent and have a $1600 mortgage. But that $800 differential is eaten up by cash and non cash expenses so the ending $$ is $100-200/mo on your projections. Don’t confuse yourself by not counting all the costs you’re paying with your time.
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Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
6y
Hi Brian, Its not necessary if that is your goal and you are happy netting what you are getting with the time spent and risk of owning the properties. Some will say more more scale scale but too much too fast blows things up. That story always ends the same. Do whatever works best for yourself. Sleeping good at night when your risk is in check is priceless.
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Gregory SchwartzBusiness Member
Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Brian Mackey some very good points have been made. I'd like to add to the equation by factoring in equity growth. On a 30 yr mortgage you pay down roughly 2-3% over the first few years plus, the icing on the cake, appreciation is on average 3-4%. Quick math
Lets look at a 200k home on a 30 year mortgage. Principal paydown of $2,500 and appreciation growth of $6,000 for a grand total of $8,500. So yes those additional properties might only cashflow $2,400 over the year but your net worth is going to grow by close to $11,000!
Cash flow is nice but equity growth is where you truly build wealth.
[email protected]443-812-0357
Schwartz Realty Group5118 Reviews
Website View Page
1 Reply
Justin Juhan
Member since 2018 · 89 posts · 67 votes
6y
There is value in not having a mortgage/rent payment. Especially if it is covered by "ADUs". To me, that's ~$2000 a month I don't need to make as take home income. Or for that matter 24k/year to save up and buy a quad or apt.
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Bryan Balducki
Real Estate Agent · Denver, CO · Member since 2019 · 161 posts · 176 votes
6y
@Brian Mackey I think it definitely depends on your present goals and situation. If you feel like the properties you hold are enough, then start paying off the debt. If you feel like another property would push you to the next level, go for it. It sounds like you can at least be patient and wait for something that makes sense. Hope this helps!
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