First Deal House Hack Analysis

[Jacob Henderson]

I am located in the midwest (Wichita, Kansas) new to real estate investing and would like to have some feedback on the very first deal that I want to make an offer on.  My goal is to buy a multifamily property and house hack it by living in one of the units. Below I have broken down the income and expenses for the property I am thinking about making an offer on, there are four different scenarios that I have listed; a 5% down payment where I live in one side, a 5% down payment after I move out and rent both sides, and a 20% down payment for each situation as well. My plan is to finance with an owner occupied conventional loan, live in it for one year while making repairs to the one bedroom side, then move out and rent both sides. This property is a duplex with a one bed/one bath on one side and a 2 bed/1 bath on the other, it is listed for 80k but I hope to negotiate closer to 70k, all calculations below are based on the asking price of 80k. Owner pays water and trash, tenants pay all other utilities. 

Option 1 - 5% down payment, living in one bedroom side, renting two bedroom side

Income: $650 (for the 2 bed side, while I live in the one bedroom side)

Expenses: Vacancy 10%: $65

Insurance- $107

Water - $70

Taxes - $85

Trash - $35

Repair - $65

Capex - $158

Mortgage - $390

PMI - $56

Total Expenses - $1031

Cash Flow: $-381

Out of pocket, upfront costs - $8058

Cash on Cash Return – (-56.7%)

Option 2 – 20% down payment, living in one side, renting two bedroom side

Income: $650 (for the 2 bed side, while I live in the one bedroom side)

Expenses: Vacancy 10%: $65

Insurance- $107

Water - $70

Taxes - $85

Trash - $35

Repair - $65

Capex - $158

Mortgage - $330

Total - $915

Cashflow: $- 265

Out of pocket, upfront costs - $20,036

Cash on Cash Return – (-15.87%)

Option 3 - 5% down payment, renting both sides

Income: $1100

Expenses: Vacancy 10%: $65

Insurance- $107

Water - $70

Taxes - $85

Trash - $35

Repair - $65

Capex - $158

Mortgage - $390

PMI - $56

Total Expenses - $1031

Cash Flow: $69

Out of pocket, upfront costs - $8058

Cash on Cash Return: 10.27%

Option 4 – 20% down payment, renting both sides

Income: $1100

Expenses: Vacancy 10%: $65

Insurance- $107

Water - $70

Taxes - $85

Trash - $35

Repair - $65

Capex - $158

Mortgage - $330

Total - $915

Cashflow: $185

Out of pocket, upfront costs - $20,036

Cash on Cash Return: 11.08%

My goal is to live in one side for a year and then move out with the first two options I look at the negative cashflow as what I would pay in "rent" to live in my own house (rent is higher than both numbers in my area). Please correct me, and be blunt if my thinking is wrong but it seems like if I move in and live there for one year, I will be able to save money from renting somewhere else while building equity in the property. After 1 year, I want to use the equity I built in the house to buy my next property. I would really appreciate any and all feedback for my thoughts, math, or way of looking at this deal. 

Thank You,

Jacob Henderson