Rental Property Investor · Boca Raton, FL · Member since 2017 · 329 posts · 237 votes
Hello:
I wanted to get everyone's opinion on an issue - analyzing a standard deal vs. a prospective house hack.
Here is-are the hypothetical-facts:
Let's get say for the sake of this discussion, my target for a standard deal is 12% CoC return when running the numbers on a standard multifamily deal.
Let's say I currently pay $1500 a month in rent. However, I find a house hack duplex which has a $1200 per unit rent.
Now, when considering a house hack do you generally revise your analysis based on the actual savings you will see or as if the deal were standing alone?
Do you feel I should impute rent of $1500 to one side (which I would be occupying) as that is the rent plus my $300 savings, or do you think it's best just to assume the deal is $1200 x 2?
Again, I know there is no RULE, just looking for everyone's thoughts on that method.
The savings for me are real and I will realize them should I buy that deal. However, someday I will move on to the next deal and the duplex will revert back to $1200.
Clearly, the extra $300 boosts my real CoC return on that deal.
What I did for my case was to create a spreadsheet showing both scenarios. On one column shows how much I have to pay out-of-pocket while house-hacking and the other column shows the cash flow while renting all the units.
I think the the right way is to do your calculations using $1200 per unit. If the property cash flows once you move out, its always a good deal.
Hi Bob Razler
I had a disagreement with someone about this. In my opinion, any savings you would obtain from doing anything other than continuing to rent in your current situation is simply cost avoidance. Your saving an extra $300/mo by doing something other than what you’re currently doing. The property you plan on owner occupying is not providing you with an income of $1500 per month for the unit you would be living in, therefore I don’t believe it should be included in your calculation. I’d recommend analyzing it based on what the unit is currently renting for, and then a second time at what the unit couldn’t potentially be bringing in at market rent.
Regards,
Dan