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Updated over 4 years ago on . Most recent reply

Student Rental House Hack (Bethlehem, PA)
Hey everyone,
So as the title says, I'm planning on purchasing a 3 Bd/2 Ba SFR to house hack right next to Lehigh University in Bethlehem PA. I'll be getting an FHA loan, attempting to rent out a couple of the bedrooms for the year that I am there to come close to breaking even, then renting out the entire house to a group of students in the following years. With this particular house, there's a huge living/dining room area I will be able to split into a 4th bedroom. Student rentals at my school (and I'm sure most others) will charge rent based on the amount of students living there (about $500-600/student depending on location). So I will be able to increase monthly rent from $1500 to $2000. I've used the BP calculator for the years where I am renting out the entire house to students to make sure it cash flows (attached PDFs at end), and manually calculated numbers for the first year.
Purchase Price: $150,000
3.5% down: $5,250
Closing costs: $3,000
Rehab (adding walls/closet for additional bedroom): $5,000
monthly mortgage+tax+insurance (quote from lender): $1176 (1176*12= $14,112 for year)
other monthly expenses: $300 (300*12= $3600 for year)
All-in cash needed for year 1, assuming absolute worst case scenario and I can't find any single bedroom renters for the first year while I am living there:
$30,962
After $7,500 room and board reimbursement from employer: $23,462
I plan on pricing each bedroom way below market rent at $350/month, to try to fill up each bedroom and cut away at year 1 costs.
If I can rent out 1 bedroom: (23,462-(350*12)) = $19,262
If I can rent out 2 bedrooms: (23,462-(700*12)) = $15,062
If I can rent out all 3 bedrooms: (23,462-(1050*12)) = $10,862
BP Calculator (after year 1) assuming worst case year 1 scenario:
Note: I added money to "repair costs" to change numbers to reflect 12 months of mortgage payments I would have made during year 1.
https://www.biggerpockets.com/analysis/rentals/df4b1eda-9cde-41ee-afb7-f8d9cdb8724c.pdf
BP Calculator (after year 1) assuming mid-scenario where I manage to average 1 bedroom rented during the year I'm there.
https://www.biggerpockets.com/analysis/rentals/df4b1eda-9cde-41ee-afb7-f8d9cdb8724c.pdf
CoC ROI goes from 5.7 to 8.5.
Also, I plan on eventually refinancing to a conventional loan, lowering my fixed costs from about 1200 to somewhere in the 800-900 range, freeing up 300-400 more in cash flow each month and increasing the CoC ROI.
Would very much appreciate it if somebody could try to find holes in my plan. I think the main risk is not being able to find people to rent out individual bedrooms in year 1, since students typically have housing plans a year in advance. But even then, that just requires me to put more cash into the deal, and I still end up cash flowing after year 1 (albeit with a lower ROI).
Thanks!
Jason
Most Popular Reply

Hey Jason, you caught my eye as that’s exactly how I started out 15 years ago...house hacking a home in Bethlehem which became a student rental for Lehigh University. I actually have all 4 of my student rentals for sale right now but it has been good over the years.
Your plan looks pretty solid. I can’t see if you’re doing a 30 year mortgage but would suggest that if not.
Biggest thing is make sure it is desirable location for students. I see people try and turn properties to student since they’re “a couple blocks away.” The students can be pretty picky about where they live and don’t venture too far from other students. I assume you know this if you’re still a student...
Other than that room mates can present some challenges...