Analyzing a house hack

[Gerardo Hernandez]

Hello everyone! I am hoping to gather some knowledge from you guys. I am looking at a fourplex that I want to house hack in the Midwest. The asking price is 264k and the current rents are 1.500 2.500. that are month to month  3. vacant 4.595 with a year left in the lease. The building overall seems to be in good condition other than the vacant apartment that will need fixing. Taxes for 2020 were $4,696. I was looking at rents around the area and the average rent for one bedrooms is around 650-900 depending on how nice and spacious it is. I would say these apartments would definitely go for the lower end in their current condition(Not very updated or modern looking/Small overall). I am currently driving for over an hour to get to work and I want to start something with my life and therefore I want to get on a deal that hopefully gets me in the direction of financial freedom one day. I might add that there is not washer and drier hook ups but there is coin laundry which according to the paperwork brings in an additional 70 dollars on average a month. There is also small storage units the tenants can rent out too. Give me any feedback or advise from what you guys have learned over the years. Thank you all!

[Evan Polaski]

@Gerardo Hernandez, so given condition, you are looking at about $700 (let's assume they are not bottom of the range).  SO you bring in 2100/month, gross, given that you are living in one unit. $2100/mo = $25,200/yr.  

At 20% down, your principal and interest will be just about $12,000/yr, taxes at $5k/yr, insurance I am guessing at around $1.5k/yr.  

So that leaves about $7k/yr, but does not account for repairs, Capex reserves, vacancy, etc. If you turn each unit every other year, then your vacancy $1260, turn over costs at $1000/door, etc, and you likely are not profiting anything, and will certainly have times you are going to be out of pocket for items. But, for a house hack, if the out of pocket costs for something you own are less than you would be paying in rent, you are ahead anyways. And this does not account for any potential appreciation.

A couple things to be very careful of: Capex will crush you if it is not appropriately accounted for. If you miss a roof replacements, or appliances and HVAC die soon after purchase, you could be out a lot of money. Typically, these are fairly easy to assess, but make sure you do.