Is a cash flowing house hack possible in Atlanta, GA with current inventory/rates?

Question

Hi BP forum,

I am an aspiring real estate investor. I have listened to countless episodes of the various podcasts, read several BP books (Set For Life, Book on Rental Property Investing, First Time Homebuyer, and currently reading the House Hacking Strategy), and live on zillow haha.

Pretty much every BP author or podcast host is a proponent of house hacking. I think it sounds great in theory, but the only way it seems possible to attempt a house hack in the Atlanta metro is finished basements, mother-in-law suites, or ADUs (very few if any duplexes, tri or quadplexes). And as I run high level numbers, I've yet to see anything that comes close to a cash flowing property. My wife and I are looking to purchase our first home late spring/early summer of next year. I would love to get her on board to house hack, but it is a hard sell when I can't show her any actual examples on zillow that line up from a numbers perspective like they tout in the house hacking book or on any BP podcast.

Has anyone out there found any properties in the Atlanta area that are actually cash flowing (as opposed to just a lower payment than I would pay in rent)? My wife and I enjoy home projects. Would we be better off attempting a live-in flip strategy, forcing appreciation, and selling after 2 years?

Thank you in advance for your help!

Christopher Jason Lloyd · Answer

In many markets, the ideal house hack is getting harder and harder to find but I always found this to be true after selling many househack properties to clients and buying them myself:

The more uncomfortable you are willing to get, the more money you can make in terms of cash flow.

Below are the different ways to make a househack work nowadays in my market and many others from most likely to cash flow to least likely to cash flow. Notice that as you get more privacy and do less work, your cash flow will go down.

1. By the Room House Hack - Get as many bedrooms as you can to rent out.  You will likely find more deals that will cash flow while you live there on top of covering all expenses.  But as mentioned in the rule - this will be the most uncomfortable since you will be seeing your tenants in your kitchen almost every day.  Also check your zoning regulations to see if there are any restrictions for the maximum amount of unrelated occupants.

2. ADU (Live in ADU) - Rent out the home.  It'll likely rent more than the ADU unless you have a unicorn where the ADU is nicer than the home.  You will likely be living in the less desirable structure but numbers will look better.

3. ADU (Live in Main) - Rent out ADU.  The clients that have made the most with this strategy is running an AirBnb out of the ADU.  You live in the main home so turnover would be very easy to manage yourself or you could rent long term and just collect with less work.  Less work, less money.

4. Multifamily - Good luck with cashflow.  At least in my market, people are simply looking to reduce their living expenses and are willing to pay way over because well... their mortgage will still be cheaper than the singlefamily.  They aren't analyzing the deal like you are which is why you are confused.  Your mindset on these properties is "well this is way to high priced, my cashflow is negative $500".  Their mindset "Oh my goodness, I only have to pay $500 per month to live here and all my other options are $1700+/month".  That is your competition and something to be aware of if looking for a 2-4 unit.  The play here is hold long term, value add and many will try and Airbnb or MTR a unit or two.

ADU's in my market are the most lucrative strategies if you find the right one. Just make sure it isn't falling apart and has its own: Water Heater, HVAC, Full Bath, Kitchen and Laundry. Also ensure there isn't some zoning restriction limiting what you can do with an ADU in your market.

Josh Bowser · Answer

Hey @Griffin Davis - I'm house hacking in Kennesaw with my wife and it has been a great experience. Well worth having roommates in our opinion and we're actually on the hunt to find another great roommate.

Right now, you're going to have a tough time cash flowing in a house hack unless you're renting furnished rooms with ensuite bathrooms. Even then you would need that property to be a 4 bed / 3.5 bath.

You could likely house hack a 3/2 or 3/2.5 in most parts of the metro and reduce your housing expenses < 1k / month.

If you two are good with shared living spaces, then house hacking a SFH or a town home could be a great option. If you do not want shared living spaces, a live in fixer upper is another great option as well.

Would be happy share my experience with all of these from an agent and house hacker perspective.

Patrick Culleton · Answer

It's not likely going to be easy, but it is possible to house-hack and break even or even cashflow a few dollars on a primary residence. The challenge I would have answering your question is just the last few words "current levels of inventory/interest rates"

Current interest rates are making it difficult to keep your monthly payment low enough to allow cashflow. However, if you can house hack to reduce 50%-80% of your regular living expenses in today's market, I would consider that a win. Remember that rates will eventually come down, allowing you to refinance to a lower payment. Also, rates and values typically rise over the years, so it might be better to find something today that you can house hack and cover 75%+ of your expenses, knowing in a few years you will likely reach cash flow status or at least break even on the home. Then, once you move out and do it again, you will have a rental property already positioned to cashflow for you.

Look for homes with 4 or more bedrooms, finished basements or in-law suites, or any additional space that you can rent out easily. I converted my own garage to create additional rooms when I bought my home to allow me to rent the rooms out and cash flow more. It was a no brainer for me at the time! Also keep an eye out for assumable mortgages that you can take over at a lower than current market rate. There are opportunities out there for those willing to look hard enough! Best of luck on your journey!

Josh Bowser · Answer

I love that! I'll shoot you my number in the DMs and would love to chat.

Griffin Davis · Answer

Hi Benjamin,

Thank you so much for taking the time to respond to my question! Also, congratulations on your upcoming nuptials!

We share the goals you and your SO do (i.e. reducing living expenses, boosting savings rate, building equity, etc.)

As you mentioned, we are also not interested in house hacking a single family by the bedroom. We would only be interested in a multifamily (duplex - quadplex), a single family with a rentable basement unit or mother-in-law suite, or a single family with a detached ADU on the property.

The numbers you laid out make sense to me! I'm curious, do you see properties in the Cleveland area costing $200k and commanding $1300 in rent? Because in the Atlanta market, it is all but impossible to find any house that isn't falling apart for $200K, much less one with the ability to house hack in one of the ways we would desire. I also think it would be hard to demand $1300 in rent unless it was multiple bedrooms or in a nicer area.

I think what you laid out sounds like a dream. I would be very interested in doing it if the numbers you laid out were possible. I've just yet to see anything like it in my area and am curious if it is just unrealistic in the current environment or if people out there are finding opportunities that mathematically make sense and I just need to find the Michael Jordan of real estate agents haha.

Thank you again for your help and input!

Greg Kurzner · Answer

Griffin,  as others mentioned, my clients who are house hacking are doing it to lower their housing costs while building equity and increasing appreciation through doing improvements to the property before re-selling it and moving to the next opportunity.  I don't think there is a realistic opportunity to house hack where your rental income will more than cover expenses, especially if you aren't renting out the entire property.  An ADU or finished basement rental could provide a big dent in the monthly expenses.

If you can afford to put 30%+ down so as to minimize the effect of negative leverage, your numbers look better just like with any rental investment.  When the property appreciates and rates moderate, you will be able to refinance and improve cash flow significantly or pull cash out for additional opportunities.

Benjamin Sulka · Answer

Griffin,

They do exist but aren't exactly easy to find, Lol. Most of these would be off market and scooped up by investors that have a lot of connections and pay cash.

I used easy numbers for the sake of the math.

Trying to build up my connection base so I'm in the loop if a property like this comes up. Establish a criteria that you want to stick to in terms of the numbers, build your connection base, and be ready to jump in seconds if something like this comes in your pipeline. It pays to know people and I've seen others get deals this way.

Julien Jeannot · Answer

The house hack strategy is not meant to cash flow. That's unicorn status.

The strategy is designed to offset a significant part of your housing expenses while building equity.

Think of it this way, if it cash flowed with you living in it, the property would have an enormous cash flow which would be picked up by an investor at a premium.

Benjamin Sulka · Answer

Josh,

I'd love to chat sometime.

My future wife and I are developing a strategy and trying to determine how we want to house hack. We are open to either buying a duplex or SFH. SFH is going to be a little bit tougher based on her comfort level with roommates.

Let's talk about your experience!

All the best!

Griffin Davis · Answer

@Michael Dumler Thank you for taking the time to respond to my question!

To answer your questions: 1. Yes, we are currently renting a 2/1 apartment in the Vinings area for $1700. 2. I've only been running the numbers as LTR mostly because I have read that the STR market is oversaturated, so a LTR seems more stable/easier to project. 3. We haven't quite gotten to the point of getting pre-qualified, but our combined income is ~$150K with very little debt and excellent credit scores. We go to church on the upper westside and are primarily looking for properties in Bolton Road area, Smyrna, and Marietta. I have yet to find anything in those areas where house hacking would bring our housing cost down even to our current rent. Maybe I'm not looking hard enough or I'm running the numbers wrong, but I would love to know if you have helped clients find these types of deals and make the numbers work.

Thank you for your time!

Is a cash flowing house hack possible in Atlanta, GA with current inventory/rates?

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