Analyzing a house hack

[Chris Chesser]

When analyzing a multi family property for potential house hack, should I expect cash flow in the first year or would it be acceptable to not cash flow until I move out? Does this also mean the 2% test and 50% rule won't work as a quick point of reference on these types of loans? 

[Christian Allen]

From what I've seen 2 family house hacking could on paper look like it will cover the mortgage but in reality most likely be negative cash flow after all expenses.   If you factor in what you were paying for rent previously it could still make you come out ahead.  Triplexes have potential to make money if you can get it at the right price or increase rents through renovation or getting new tenants.  Depending on the market they have a good potential of making money after moving out.  

I've been house hacking for about a year now in a triplex and can say I have positive cash flow because I did a complete turn around of the building.  Full gut rehabs allowed me to raise rents significantly and cash flow $1000/month after expenses.  

It's hard to use the 2% and 50% rule for a house hack and in my opinion they are not the best indicator or a good deal or not.  Very often a C/D property will work with the 2% rule but I would stay far away from most of those properties.   A simple spreadsheet which you run the properties through should be able to give you a better idea of a good deal or not.