House Hacking - Include money saved on rent?

[Account Closed]

Hi All,

A newbie here just beginning to wrestle with a lot of these concepts. I've got a deal analysis question about a buy-and-hold rental property. I'm practicing Brandon's "Four square" method on a bunch of different places (you can find it on youtube, it won't let me linke). As I'm going through these I'm wondering if, for house hacking specifically, you include the money you save on rent in calculating cash flow? For example, imagine a deal that requires $43,250 up front. The rented out portion of the property cash flows $166/mo or $1992/year making the CoC ROI = 4.6%. If your personal cost of capital is ~7-8% then I imagine it'd be a no.

However let's imagine I'm paying currently $1250/mo in rent and if I didn't move on the deal I'd continue to pay this for the foreseeable future. Imagine further that I could rent out the portion of the property I intended to live in for $1000. How, if at all, would I factor in the money I saved on rent in to the final deal analysis and my own CoC ROI?

THANK YOU for the help :)

[Dan Weber]

Run your numbers as if you are NOT living in the property. You won't be living in this duplex forever, and as so, run the numbers as a pure 100% rental to get an accurate ROI number.