Is a House Hack worth it if it wont cashflow right away?

Question

I am very new and looking to do a house hack for my first property. The problem is that I live in Upstate New York. Every decent looking duplex I find costs over $200,000. When I do the analysis I find that the properties simply won't cashflow if my wife and I were to live in one unit and rent out the other. In fact it would still cost us a few hundred dollars at the end of the month. What I am wondering is whether or not it is still worth it? Considering that the amount of money we would be paying would still be less than our current rent, and we would be at least building equity this way. Is it worth it?

I greatly appreciate all advice and wisdom!

Steven Foster Wilson · Answer

A lot of times the house hacks that I do here in Columbus Ohio, do not make money to start. Sometimes they just break even or sometimes I have to pay a little. But once I fix them up and move out they sure do make money. If that would be the same for you then I would say do it. Get the ball rolling so it can just continue to grow.

Conner Olsen · Answer

I had this problem too. I changed my criteria so instead of wanting to live for free, I wanted to only pay the principal of the mortgage. I wanted the rent to pay for the interest, taxes, and insurance while I lived on the other side. Once I had that mindset shift a lot of properties worked. Living for free while doing LTR is difficult right now because of the higher prices and interest rates. If you rent the property as a STR or MTR you can live for free (that's what I did in Austin, TX).

Conner Olsen · Answer

@Nathanael Leece Also it's more important that it cash flows when you move out. You don't want it to be cash flow negative then. And like @Eliott Elias said, compare it to comparable rents. I went from a 1 bedroom $1100/month rent to a 3/2 and was paying $1200/month before switching to STR. I thought that was a bad deal because I was paying more until I realized that 3/2 rent in the area was $1800/month and I was getting loan pay-down of $630/month and tax depreciation and appreciation. Sometimes looking at it from a different angle can help

Steven Luttman · Answer

@Nathanael Leece to summarize, your housing payment would go down while at the same time you would be building equity in a property you actually own...It's hard to imagine continuing to rent is the right answer here. If the goal is for the rental income to cover your housing expense in full then I would encourage you to focus on 3-4 unit buildings, as then it becomes incredibly doable. If you have your heart set on a duplex then great go for it, reducing your housing payment to "a few hundred dollars" is a massive win and positions you for great success going forward.

Eliott Elias · Answer

Is your monthly mortgage at the end of receiving all your rent payments lower than if you were to rent somewhere else? If so you’re winning

Katherine Blazer · Answer

If you are living in one of the units. Will your monthly payments for living in the duplex be less or more than if you were to buy a single-family residence? Will it cash flow when you move out? Can you negotiate a lower price?

Wesley Sherow · Answer

@Nathanael Leece I invest mainly in the Albany, New York and surrounding region. In general there are great deals out there that WILL allow you to cash flow on a house hack property. I very carefully make the statement of I think you're looking in the wrong places. In general, especially if you haven't purchased a house before, there's plenty of opportunity to go out there and find something in the $200,000 range that WILL generate you income above and beyond your monthly payment, even while living there. Consider in this that there are properties out there that have 3 and even 4 apartments all the way up and around the $200,000 price point. Add in the possibility to purchase a property that needs some extra work that you can do yourself, and then you're really cooking. You can even go the extra step and AirBnB your vacancy. Although you're signing up for a little bit more work, if that doesn't pay your mortgage I'll quit doing real estate. That said, upstate NY is a pretty large place. Where specifically are you looking?

Randall Weatherall · Answer

I learned from an older, very well-off investor in my market to buy nicer SFR in the burbs, live in them for a year for the better loans, move out and rent them after. Best tenants, best properties, best loans and start selling them off in 15 years, one a year, to retire. If you're able to do it, go for it. Short term vision is important, but this is a long game and you can always pick up properties on the side when the market is down to boost your portfolio and monthly cashflow to accelerate your processes. Just a thought.

Ryan Kelly · Answer

@Nathanael Leece the goal with house hacking is to create SAVINGS that you can use the invest in the future AND to lock up a property today that will become a future investment. Breaking even or making cash flow now is nice, but not the goal with househacking. If you are able to save dollar-for-dollar $500 to $1000 versus what you would pay in rent, you have greatly reduced your living expenses and can use those funds to accelerate your investing plan. Once you move out, you now have a rental property as well. Don't get stuck on making cash flow now. Get a great property you will enjoy in a great location, save money, and remember real estate is a long-term investment. Go get it!

Nathanael Leece · Answer

Yes it would cash flow when we move out, and my realtor thinks the seller would take a little less. and the monthly payments would be a good deal less than if we bought a single family residence!