How does house hacking change the sell/stay breakeven equation?

[Nate Hemby]

Hey BP friends,

I am beginning to search for a property to house hack in the DFW area. If all goes to plan, I'll house hack here and use the BRRRR method for 3-5 years, acquiring 2-3 properties during this time. I plan to move after this time period. If I move out of the area, I'll either sell or hire property management, depending on life circumstances at that point in time.

Traditionally when buying a SFH the wisdom is to not buy unless you plan to own the house for 5-10 years due to selling costs and equity gain from paying the loan. However, this doesn't factor in any forced appreciation or loan paydown from tenants.

So my question is - does this wisdom still hold when you're house hacking? If not, would the breakeven point come sooner or later? My intuition is that it would come sooner due to the appreciation and loan paydown.

Let me know your thoughts!

[Scott E.]

Not sure where that "wisdom" regarding needing to own a property for 5-10 years to cover selling costs comes from. But you should ignore it.

I've bought and sold dozens of SFH's over the years and I only owned 1 of them for 5+ years.

If you buy right and add value through renovations, you can sell in 2-3 months and walk away with a healthy pay day. No need to wait 5-10 years.

My 2 cents here is to ignore any of these generic rules that you've heard of. Just underwrite the deal based on your objective and risk tolerance. If you're looking for cash flow, underwrite the deal based on whether or not it achieves the return you are looking for. If you're looking for a flip profit, underwrite the deal based on the ARV compared to the purchase price+rehab costs.