I need your advice on this househack!!!

[Daniel Lehrman]

I found an amazing househack for the next 3-5 years, but am I sinking myself for the long-term?

Here are the facts:

• 2000sq ft main house in a very desirable neighborhood in Phoenix
• 860sq ft guest house (I would be living here for 3-5 years)
• Purchase price $380K
• Down payment is 20%
• Rehab costs:$5K to replace flooring.  Otherwise, it was recently remodeled by the owners
• Estimated rent (based on MLS data, craigslist, & Rentometer) = $2000 - $2400 for main house, $900 - $1000 for guest house.

If all goes well, my tenant will pay most/all of my PITI, and I would be able to accelerate my savings. There are not many houses I've seen that have a guest house this large.

My concern is that I’m paying top dollar for a house at the top of the market.  If we see a correction in the next 5 years, which many argue is extremely likely, I will not be able to sell the house and will need to rent it out for (potentially) negative cash flow--not ideal.  I won’t go through the numbers on this post, but it doesn’t meet the 1% rule, so I’m assuming the worst.

Some tell me to “Jump in!  Don’t let fear stop you!  You will make mistakes and learn!”  Some say “You make your money when you buy, so buy right.”  Others say both. 

What do you think about this deal?  Should I do it?

Other factors:

• Property is in the flood zone, so I will need to buy flood insurance.
• Theft in 2016 (though Crimereports is clean for the last 6 months)
• Drug rehab center 3 doors down
• Water treatment plant within 1 mile of the neighborhood (Didn’t smell anything though)
• This property was purchased by the current owners for about $250K in 2012.They’ve taken very good care of it, and remodeled it very nicely this year.

I would really appreciate your input!