Thoughts on First Property

[Alex Boyce]

Hey BP,

I'm currently renting and looking to buy/house-hack my first property. This particular house has a garage apartment, so the plan is to move into the garage apt and rent out the house. I can also Airbnb the apt on the weekends and crash at a friend's place. 

Purchase Price: $260K 

Downpayment: 3.5% via FHA loan = $9,100

Closing Costs: $7,800 (Asking seller to pay)

Rehab: $0 (House is in excellent condition, with limited/no rehab/upgrade potential)

Total Cash out of pocket: $9,100

Annual Rents: $36,000 (2,200/mo from house [utilities included], 800/mo [8 nights/mo] from Airbnb = 3K/mo)

PITI: $19,417 (30 year fixed @ 5% - estimate, need to find a lender)

HOA: $2,328 (includes cable)

Utilities: $5,160 (Electric, Gas, Water, Trash, etc)

Other: $6,120 (6% Repairs, 6% CapEx, 5% Vacancy Rate)

Cash flow: $4,775 ($398/mo)

Cashflow Margin: 13.3%

2% rule: 1.15%

50% rule: 41.8%

Cash-on-Cash: 52.5%

Cap Rate: 8.1%

Gross Rent Multiplier: 7.22

Debt Coverage Ratio: 1.3

Thoughts? The model varies a lot based on how much I can rent out the garage apt (breakeven at ~4 nights/mo)

[James Carlson]

Hey @Alex Boyce . I can't speak to your other numbers but just wanted to weigh in to say that I don't think that Airbnb money is crazy at all. The biggest issue is if you're in an area where people want to stay. Be sure to do some detailed comps on the Airbnb site -- look at places that are getting booked that are the same size, same style, same area. You can also try AirDNA or Mashvisor where you can pay for more concrete numbers on occupancy and Airbnb rental rates for your area. If you're in a good location, and if you furnish it nicely, take great photos and ensure good customer care, you can get that. Good luck!