Buy a house-hack now vs buy during next recession?

[Eric Li]

Hey everyone,

Last year, I started looking at multifamily property in Oakland to house hack so I could live cheaply / free while building equity. While the cash flow and numbers can work with the right property, I think a recession is 1-2 years away, so buying now could have some drawbacks since I only plan to stay in the area for ~5 years max.

Below is how I'm thinking about it, but what do you think? Am I off base, have I missed something?

To test my thinking, I created a simple model that projected total cash flow and equity over 5 years if I:

1. Bought a good, cash-flowing MFH now and recession hit in 2019
2. Waited and bought an MFH in 2019 during a recession
3. Waited and bought an MFH in 2020 during a recession

The model assumes that a recession results in a 10-20% drop in housing prices which rebound over 1-2 years. If I don't buy, I would rent for $1300-$1400 / mo by living with a roommate (what I actually do now).

Based on the model, I think waiting to buy makes sense for a few reasons:

• Buying during a recession is 15%-40% better from an equity and cash flow perspective when compared to buying a deal right now. This is driven by better rent:price ratios during a recession, not buying high and going through the rollercoaster of house value fluctuation, etc.
• I can afford a house in a better location once house values fall in a recession

Obviously, waiting to buy obviously only works if I am still employed and can get a mortgage approved in a recession. I think I can make that work given my work situation and how much I can save each month to meet higher down payment requirements when lending tightens up.

Thanks in advance for your thoughts!

Eric