Help me analyze this deal review? House Hack

[Zach Gring]

This would be a house hack at worst case situation paying asking price, with an fha loan that is adding a very high cash on cash return. Entered all filled in rents that are currently filled. Should we have left one of the unit numbers off of the report?

Thank you in advance!

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*This link comes directly from our calculators, based on information input by the member who posted.

[Jaysen Medhurst]

@Zach Gring, for a house hack you need to run the numbers both ways: you living there and after you move out. This analysis is for the latter, which is fine.

A few things to think about:

• How does this price compare to other properties? The price is up 20% in 18 months. Is your area really seeing that kind of appreciation?
• Include a budget for initial repairs. There's always something!
• I bet you can do better than 4% on an owner-occupied mortgage.
• Vacancy will probably be closer to 8%.
• Insurance looks low for a $300k property.
• Water/sewer might be a touch high. Call the local water authority.
• With a low-down payment loan you'll have PMI.
• You don't have management (10%) in your expenses. Always include this, even if you plan to self-manage at first.
• What about lawn care and snow removal? You may take care of this when you live there, but you should assume you'll be paying once you move out.

I bet you just about break even on this property (after you move out). My approach would be be to aggressively pay down the mortgage while you live there to get yourself to 80% LTV. Then refi out of the FHA, lowering your mortgage payment.

Last thing to consider is a non-FHA low-down payment product. This avoids some red tape and the need to refi to get out from under the PMI, which also saves a second set of closing costs. Most local banks and credit unions will have something.