Cash Flow on House Hack

[Tomas Valladares]

Hi BP community! I'm looking for some guidance on house hacking. 

Background:
I'm in the DFW area and preapproved for 300k at 7.25%. The houses in my area that could work (3bd 2ba) are at the bottom of the market around the 260k-280k range. Putting 20k down, my expected housing payments are going to be around $2400 a month. I'm estimating $1800 in rental income from three roommates so I will be paying ~600 a month. I am currently paying $600 a month in my current apartment.

Question:

With current interest rates, I am not able to lower my housing payment below what I currently pay in rent. However, I am able to get myself into a house where I will be able to pay rent back to myself and build equity, likely appreciation, landlord experience, and increase my quality of living. Does this count as a house-hacking win? 

I know most people try to lower their housing payments to below what they would pay in rent but that's not going to be possible in my case. Also, I do not expect I will be able to have positive cash flow after moving out unless rents in my area increase and/or interest rates fall.

Thank you very much for any responses! Please let me know if you'd like any other details.

[Eric Yu]

Quote from @Tomas Valladares:

@Devin James Thank you for sharing James! That helped me confirm how my rent-by-the-room strategy will get me started.

@Ryan Thomson Thank you so much for responding, Ryan! Since reading Craig Curlop's book a couple of years ago, I had forgotten about the net worth ROI so I'll review that and see how the numbers look. Just based on principle, I am trying not to rely too much on appreciation especially with the FED raising interest rates over the next year or so. However, the DFW area is growing fast and I would be purchasing close to UNT and TWU which are two growing universities here. I will likely find a property that needs some sweat equity to help accelerate that appreciation.

Thank you both for your input. I was pretty much going through this blind and wanted to check if this was still a reasonable decision.

With interest rates the way they are right now, it's going to be difficult to find a home run deal in this market (especially if it doesn't require any rehab). That said, you can also view this as an educational cost. There's a lot to be learned & the sooner you get on the real estate train, the quicker you'll build up skills that will help you toward the next investment. 

In Seattle these days, it's pretty tough to find deals where you'll pay less than market rent, but some of my clients still do so because of tax benefits, equity gain, loan payoff, etc. 

You'll never know when rates drop, but if they go back down to the 4% or so range, you'll be able to refinance and have a much numbers to work with! 

Good luck!