Running the numbers in a house hack

[Darrel Hernandez]

I'm a new investor and have found that house hacking is the best way for me to enter. I am wondering however how do you analyze this sort of investment property? Do you run the numbers as if you were to rent at all units? Should the only goal be to live rent free?

[James Carlson]

@Darrel Hernandez

First off, good for you for jumping in. It's tough to break from the doing-research phase to pulling the trigger. 

Second, no offense intended, but I hate the question -- and it's one I see on here a lot and with my newbie investor clients in Denver and Colorado Springs -- of "what should my goal be"? There is no clear-cut, always-true answer. It depends on all sorts of factors and your priorities. Where do you fall on the spectrum of cash-flow vs. privacy? (This can determine whether you do a rent-by-the room house hack or a basement apartment or a duplex.) Do you prioritize being in a certain neighborhood or would you live anywhere to get the most cash flow? Are you all about cash flow or does future appreciation potential factor in? (This can change whether you invest in an attractive but expensive city or go out-of-state and invest in c-class neighborhoods.)

And in the end the truth is you will likely make mistakes with your first investment. I think it's great to dive in, learn from those mistakes and then get on to the next one. I know you didn't ask for this totally-condescending pep talk, but your "what should my goal be" triggered me.

Again, congrats on taking a big step. Good luck!