Deal Analysis- House Hacking in NJ

[Brett Baginski]

I currently own a townhouse where my mortgage plus HOA is $1,665. Rentometer says my place would rent for $1,908, Zillow says $2,300 which seems way too high, then Zillow rental comps are around $2,000-2,100. 2 bed, 2.5 bath, with garage, near the beach.

My goal is to eliminate my mortgage payment, or come close.  I figured I could rent my current residence out, then move into a duplex and house hack for a year and only have to put 3.5% down.  Below are the details for the potential property.

Purchase price: $265,000, I based my numbers off $250,000 which I think will work for me
Taxes: $7,041 for 2018
Rent Income: $1,500 on a yearly lease and $1,100 on a monthly.  I would move in the smaller unit that is being rented month to month, so this leaves me with $1,500 in rental income
Expenses: I used 5% Vacancy since I would be living in a unit, I figured it was less likely of vacancy, 8% R&M, 8% Capex
Cap Rate: I estimate around 8%, it's about two blocks from the waterfront in an area that is improving
Recent work on house: MLS says "recent work gas heating unit and windows siding and roof"

Based on the BP rental calculator my monthly cash flow while living in the unit will be ($558), after 1 year and I can move out cash flow looks like $310 for the two units.  Renting my primary residence out now should net me over $300 per month, so total out of pocket will be around ($250) per month.

I think the home is overpriced at $265,000 and an 8% cap rate, I would try to offer $240,000 which is more in line.

Looking to see what the BP community thinks.  Thanks for reading!

[Jaysen Medhurst]

@Brett Baginski, your townhouse is not likely to be a good rental. Does the $1665 account for taxes and insurance? What about repairs, CapEx, management, and vacancy. Very unlikely you'll actually see any cash flow here.

The house-hacking idea looks okay. As a way to lower your expenses, build equity, and get experience as a landlord, I say go for it. But it won't make a great rental once you move out. I think you'd be lucky to cash flow $50/month.