House Hacking Planning in Idaho

[Nathan Gardner]

My goal is to buy a house hack when I move next year back to my hometown after finishing dental school. I want to start my real estate investing journey by house hacking.

I did two calculations for a 4-plex and a duplex in the city I want to move into. These calculations include gross rent as if I were collecting rent from myself as a renter. Both purchase prices assume I can get the seller down 5% as well. Ideally, I'd like to see cash flow here if I were buying these properties as a standard rental as simulated in these calculations. 

A few things to consider. If we were to rent, we'd probably be paying about $2100 a month for a 3/2 SFH. We'd be paying about $3,000 to own a 3/2 SFH.

For the Duplex here, I estimate we'd be paying about $1700 a month after we paid our half of the 3000 gross rent and paid for the negative cash flow out of pocket each month.

For the 4-plex, we'd be paying about $3000 in total each month after covering negative cash flow. But, the units are a bit nicer in a bit better neighborhood.

With our income, we are not worried about being able to cover the expenses of some negative cash flow but we want to optimize our planning. The market seems very expensive right now and we are unsure if we will be able to find a deal that works out and don't want to get myself into a bad situation. 

[Andrew Postell]

@Nathan Gardner thanks for the post here.  A couple of pointers:

1. House Hacking doesn't ever cash flow - well, maybe I should say EVER but it hardly ever does.  The benefit to house hacking is 2 fold.  1) I am buying a property for the smallest amount out of pocket that I can 2) I am REDUCING my housing expense.  That's the reason that we house hack.  If you were to purchase a 2-4 unit WITHOUT house hacking your downpayment would be 25% down in most scenarios.  So 3.5% down compared to 25% down is a savings of $182,0000!  So buying a $850,000 is more possible for most people with house hacking.

2. Quads and "Self-Sufficiency" - It appears that you are using an FHA loan in your numbers. Keep in mind that 3-4 unit properties have an extra requirement with them called the "self sufficiency" test. And currently, no 3-4 units are passing the test. Duplexes do not have that requirement. Ensure you are speaking with a knowledgeable Loan Officer that knows these little rules. When you get prequalified, ask them specifically about the Self-Sufficiency Test. If they don't know what that is, say they will go find out, or cannot speak to it specifically then please go to another loan officer. It's really important to know.

I hope all of that makes sense but feel to ask anything additional.  Thanks!