[Calc Review] Help me analyze this deal - HOUSE HACK Rent By Room

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  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
    6y

    @Michael Menchaca - according to your report, you'll get to live there for $1541/mo. (given that this is a house hack). Is that a good deal? With today's rates, it's not at all impressive. That said, there's one thing that could totally change the equation: electricity. 
    What's the reason you'll be paying $1000/mo. in electricity?

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  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    6y

    Hi Michael,

    I am looking at your analysis and it shows you're paying to live $1.5k a month to live there? I feel like you should be breaking even or at the very minimum only paying a few hundred dollars at the very maximum. I feel like $1.5k a month is quite expensive and not worth it.

    Also, I feel like $650 for a single bedroom is a bit expensive. I think $400 - $500 is a more realistic but it depends on what market you are in I guess.

    Also, why is your electricity $1,000 a month? If you're house hacking, you will be sharing utilities with your other roommates. And why is your insurance $333 a month? Insurance is like $1k a year in total. I think some of your numbers need to be fixed.

    [email protected]614-300-7535
    Jimmy Lieu, Red 1 Realty4.9120 Reviews
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  • Obi I.
    Rental Property Investor · Baltimore, MD · Member since 2016 · 109 posts · 31 votes
    6y

    @Michael Menchaca The beauty of the house hack is that you use the rent from your tenants to reduce or eliminate your mortgage. In your case, your rental income eliminates your mortgage but it's not enough to eliminate your other expenses.

    There are three ways to solve this issue: (i) increase your income, (ii) reduce your expenses, (iii) reduce the purchase price of the property. 

    For the income, check online to see how your projected rents compare to other properties in the area. Ideally, you want to be a little lower than the market so you can entice your tenants to stay longer. 

    For the expenses, check your taxes and electricity expenses. Combined that's $1500 which is the major source of your negative cash flow. There may be more scope to reduce your electricity bill than your tax bill, so start there. 

    For the purchase price, how does this compare to 3-bedrooms houses in the area? Is it in an expensive part of town or an up-and-coming section of your city? If you can lower the price a bit, it could help you reduce your mortgage.

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