Advice on a potential house hack with a 5BR SFR in Durham NC

[Annchen Knodt]

Hi everyone,

I'm getting started in REI though I currently rent my primary residence, a 5BR 2800 sqft single family home (built in 2006) in a nice neighborhood in Durham NC (Hope Valley Farms) that I split with 3 other roommates. The owner of the home just let me know that he's decided to sell, and has given me the chance to make an offer before putting it on the market.

I estimate that the market value is around $300k (fairly confident in this estimate bc a nearly identical comp nearby just sold for $307 with just a few small improvements).  So if he sells to me directly I estimate he saves ~$18k in agent commissions. From there, my guess is that $280k is likely close to the lowest price he would accept from me.  At that price, when I run the numbers the result suggests that I'd generally break even:

• Taxes/insurance/HOA: $450
• Reserves for vacancy/repairs/capEx/management: $500 (i'm using 7%/5%/5%/8% for these respectively)
• Mortgage: $1025 (this is based on a 30-year fixed primary-residence loan at 3.625% with 20% down through a credit union I bank with)
• TOTAL expenses: $1975
• Rent: $1985

I just LOVE the idea of house-hacking, and it would be amazing if this proved to be a good move.  My main reservations about going through with it are:

1. There's a large crack in the flooring shortly after you walk through the door to the house. The wood laminate flooring panels are coming apart for a stretch of around 20ft, and in some places the gap between the panels is over 1/4" and through it you can see a corresponding crack in the slab underneath. The owner has said that he has good insurance and can easily get that taken care of before the sale.  I'm not sure it's as simple as that, but he seems very confident…  Otherwise, the house is in good shape.
2. The market in Durham is super hot right now! It seems like if I buy anything here now, I'm very much likely to over-pay
3. I estimate that this would require at least $60k to close on.  That's a lot of cash to leave in a break-even deal and not have for other investments!

I would love to hear any thoughts that folks familiar with the Durham market or with large SFR investment properties in general have on this potential deal. Thank you very much!

Annchen