To house hack, or not to house hack?

[Matt Anderson]

To house hack, or not to house hack? That is the (leading?) question.

My fiancee and I moved into our new place at the beginning of March, right before the COVID-19 activity started to get serious. We were so excited to house-hack, because this house has a walkout basement that is already partially finished (walls, floors, overhead lighting), but needs a 3/4 bath put in, along with a small kitchenette in order to be rent ready (that is all our local market demands). Plan was to rent on Airbnb, but obviously right now that is not a good plan, so we are looking at trying to fill with longer term tenants (at least month-to-month).

Some details:

- Expected rental income = $1k-1.2k (based on neighbors with same setup doing same strategy)

- Quoted cost to install bathroom and kitchenette = ~$10k (based only on one contractor estimate so far, tough to get more to come look at the job right now, also we plan to keep costs in check by doing some work and sourcing materials ourselves)

- We made sure when we bought the home that we could comfortably make our mortgage payment without any extra income from the basement, so we are not forced into doing the project or collecting rent to stay afloat.

So, my question is this: should we do this project now, while we are home with more time on our hands due to social-distancing, or do we keep our cash on hand and wait for the storm to pass before taking on this project?

My gut says to wait and hold our cash because by my (back of the napkin) math, it would take 8-10 months (being fully rented at the rates above) to make our investment back, and it seems likely that it will be much harder to rent units during times like this. There is added risk of potential income loss from a layoff or pay reduction, if the current climate continues to worsen. We have reserves such that we definitely would not be broke if we did the project now, but it feels impossible to say that any amount of reserves is "sufficient" right now.

Would anyone think about this situation in a different way and/or come to a different conclusion?

[Kurtis Delahooke]

About 3 months ago I spent $6K getting my house hack off the ground and made about $1300 before all the cancellations began on airbnb. My recommendation is to hold your cash until the economy opens back up. Also, having multiple contractors talk through design and pricing was a huge help to me, I wouldn't want to be stuck with the only contractor available.