House Hacking in Washington DC

[Collin Ordonez]

Hey All, 

We have been searching for a place in DC proper for a house hack. The goal is to get a property with 2+ units and with current interest rates, it is hard to find something that will end up cash-flowing after we move out in 1-2 years. While living in the property we will be able to Airbnb one unit while living in the other. The Airbnb will give some higher returns, but due to permitting in DC we wouldn't be able to run it as an Airbnb after we move. There are two properties we have looked at this week, see the below descriptions:

Property #1: 

3 bedroom upper unit with a 1 bedroom Basement apartment in a great neighborhood with a metro stop a few blocks away. The current list Price is $875,000. The property needs a complete renovation and we expect the cost to be somewhere between 75k-100k. The ARV should be around 1.1M. Our monthly payment with putting 5% down will be $6,700. Long-term rents for this unit should be approximately $5,500/month. After moving out it would be cash flowing negatively around -$1,200/month before taking into consideration capex, maintenance, etc. but while living there and renovating the unit we will have gained approximately $125,000 in equity.

Property #2: 

3-bedroom unit with a separate basement entrance that could be converted into a 1-bedroom basement apartment, but in a slightly less appreciating neighborhood. The current list price is $695,000. The property needs a complete renovation and we expect the cost to be around 100k. The ARV after should be around 900k. Our monthly payment with putting 5% down will be $5,300. Long-term rents for this unit should be approximately $4,300/month. After moving out it would be cash flowing negatively around -$1,000/month before taking into consideration capex, maintenance, etc. but while living there and renovating the unit we will have gained approximately $105,000 in equity.

Neither property will be cash flow by the time we are moving out (unless rates drop dramatically and we can re-finance). We could do a "Live and Flip" and sell the properties after 2 years and use our equity for the next deal. We feel stuck right now on what the "right" thing to do is in finding the balance between cash flow and equity when house hacking. It doesn't seem that with current rates there is much that works in the DMV area in terms of having cash flow after moving out of the house hack. Any guidance is appreciated!