Analyzing a Proposed House Hack with Home Office

[Rob Wells]

Hi Guys

I wanted to run this idea of a house hack on the forum as I think it’s a no-brainer idea but my wife thinks I am crazy and opposed to moving and living with folks.

Here is my situation. I currently rent a 3/1 condo for $1,450.00 month and I rent a private office from a friend for my practice for $500.00. Total rent paid each month is $1,950.00. Condo rental is on a 1 year lease expiring 10/31/18, the office rental is month to month. I pay all utilities at the condo except water as it's covered in the HOA. I pay no utilities at the office.

Here is the proposed house hack. I have the opportunity to rent a 3/2 house from my immediate family member. The home is about 1800 sq ft with a huge undivided living room (about 500 sq ft) . The master bedroom is completely on the other side of the house to a point where I could sell it as its private suit and such.

The proposed hack would be this, family member is going to rent the property for $1,500.00, I can put in whatever lease term I want 1,2 even 3 years. I am looking at locking up the deal for at least 2 years. The going rate for rooms in my area is about $600.00 to $1,000.00 a month.

The hack would be I would market the rooms with all utilities paid and would shoot for the following numbers on the rooms. Charge $950.00 for the master suite, and $850.00 for the 2nd bedroom. Me and wife would stay in the 3rd bedroom. Target audience would be the medical professionals and or within the area; I am surrounded by two hospitals within a ½ mile radius of the property and I have two colleges within the city. I pretty confident I could get a professional to be house hack mates with.

Here is the additional twist, I would move part of my office into the living room of the house. I would be partitioning about 150 to 200 sq feet of the living room for my office, to do admin work, do the lawyer thing and draft documents and to store paperwork. I would be meeting my clients and have my mailing address at a really good family friend’s real estate brokerage office were I used to have my office about a 2 minute drive from the property. I am in the works now of attempting to negotiate a flat rate where I can use their conference room for client meetings. I am attempting to keep costs to about $200-300 a month max for this part.

The idea of this monster hack would be not only to reduce my $1,450.00 nut to live in a condo, where I probably spend only 1/3 of my time in (since I’m at work), I am also looking at attempting to deducting a bulk of the necessary utilities I just pay for with after tax dollars since my businesses (the law office) and the renting out the rooms will generate these expenses.

Here are my Anticipated Numbers

Rental Income

Room 1 $950.00

Room 2 $850.00

Room 3 $0.00

Gross Rent 1,800.00

Expenses

Rent $1,500.00

Electric and Gas: $300.00

Trash: $60.00

Internet $80.00

Alarm $25.00

Sling Tv: $35.00

Water: $100.00

Insurance: $50* (going to need to investigate if I need to obtain landlords policy or endorsement on current policy, projected cost of insurance)

Total Monthly Expense: $2,050.00

Gross Rent minus Expenses: -$350.00. Add additional rent for conference room $300.00 So total monthly nut $650.00

Prior Base Rent paying $2,050.00-$350.00= Savings of $1,700.00 per month x 12= $20,400.00 savings.

Only issue I am having is the Wife is diabolically opposed to 1) moving in to this property 2) does not want to live with other people. She has put on the table that she would be willing to allow me to rent out the 3rd bedroom and stay in the condo we are in but the whole point of this is to get our overhead down to as little as possible. I’ll run numbers here if I did the condo and rent out the home.

Rental Income

Room 1 $950.00

Room 2 $850.00

Room 3 $750.00

Gross Rent 2,550.00

Expenses

Rent $1,500.00

Electric and Gas: $200.00

Water: $100.00

Trash: $60.00

Internet $80.00

Insurance: $50*

Gross Home Expense: $1,900.00

Gross Rent minus Expenses: $650.00

Condo Expense:

Rent $1,450.00

Electric and Gas: $100.00

Trash: $30.00

Internet: $40.00

Alarm: $25.00

Tv: $35.00

Insurance: $14.00

Total Condo Expense: $1,694.00

Total Rent Minus Expenses: $1,044.00

Note: The numbers do not reflect vacancy, repairs and reserves. I would probably factor in about these items at about 15% or $382.50 per month on the gross rent if I was not living at the home. Also if I rented all the rooms, I probably would not have my office at the house so I would probably be paying an additional $500.00 in rent for office space.

Any thoughts or comments, let me know if you have done this before. BTW, I am looking into a 1-4 unit property but out where I am at prices are way out of line for me to purchase something. Duplexes that need like 20K worth of work in C- areas are going for $400K+. After I stabilize my home situation, I am looking at going into cash flow markets like in the mid-west and the south to get out of Cali. For basically no money down and stabilizing my home situation, I feel that this is a really smart move as I am controlling my housing situation and the family member that is allowing me to do this really has our best interest at heart. The house was just sitting empty for a year so to me it’s a win win all the way around.