Real Estate Agent · Member since 2018 · 89 posts · 25 votes
Hey BP
When looking at doing a househack on a Duplex- how do you typically apply the 2% rule and the 50% rule? Is there another rule of thumb I should look at instead?
For example on a house I'm looking at
Cost- $310,000- 4BR, 2Bath Duplex
Mortgage (based on RedFins calculator)- $2,008 / month, which includes taxes and insurance.
Average Rent- $1,500 / month
If I were to rent this to two people my income would be $3000 but since I'd be living in the other half, I would contribute roughly $500 / month (I am currently renting at $1,500 / month in Portland so I see this as gaining $1,000 / month on my end)
But since I'm living it the property the numbers I'm seeing based off the general rules of thumb don't make sense.
How should I adjust my analysis to take into account that I'm living there?
Developer · Portland, OR · Member since 2014 · 732 posts · 490 votes
7y
Those rules aren't the best guidelines to go off of in Portland. It is a unicorn where you can buy a duplex and hit the 2% rule right now.
When looking at the rental rate vs. property value you need to look at market rental rates. So if you only pay $500, you still need to know what the unit would rent out for and use that in your analysis.
Real Estate Agent · Portland, OR · Member since 2013 · 412 posts · 219 votes
7y
Hey Sean,
Neal is right-on about the 2% rule. What you’re also going to want to take in to account (and I’m not sure these fit into an excel sheet) is the benefit to buying owner-occupied-from loan flexibility and down payments to reduced living expenses and ease of self-management. Those wins come at a price and that price is often a hit to your cash-flow. On the other hand, it gets you started and that’s huge! Think about it like this-if it was a good deal and met all the rules of thumb at 3.5% down there’s no way an investor wouldn’t snap it up and make a killing with a conventional investor loan or alternative financing.