House Hack Deal Analysis (with numbers)

[Benjamin Sulka]

Hey BP,

I shared this on the deal analysis forum and got no responses so trying my luck here. Trying to consider the long term wealth benefits of owning real estate and not just the numbers themselves. My goal is to pay less than I would renting and get my feet wet with REI and landlording without bleeding too much every month. Please scrutinize the crap out of my numbers! 

I'm going to paste a photo of my analysis so I don't have to type everything out but wanted to call out a few things:

-This is a duplex house hack where my fiance and I would be taking over one of the units.

-Taking 10% reserve for vacancy, PM, and Capex

-5% for repairs

-All other numbers are standard values based on my area. Need to do some more digging into utilities though.

-Current market rent is $1,250 per unit

Here is what numbers look like when I live there:

We currently pay $1,450/month in rent right now so that's something to consider. We'd be paying less than we would renting after taking conservative reserves.

Here is what numbers look like when I move out:

Negative cash flow but

1. Rate is 7%

2. Only put 5% down

3. Cash on Cash return is 52.7% (obviously we will put more cash into things throughout the year which will make the COCR lower.

Would love to hear people's thoughts! Thanks for your time :)

-Ben, aspiring multifamily house hacker

[Bonnie Low]

It's hard to make anything cash flow when you're only putting 5%down and have to pay PMI. That said, many house hackers do just that because it's a way to get started. I'm not sure why you're budgeting for offsite management. Just self manage and save yourself the money. Same with landscaping and yard care. That will help a little bit. Can you count on mortgage rates being low enough to refi and make sense for you? Will you have enough equity in a couple of years if rates go down in order to meet the LTV requirements of the new lender? That is something you should explore before you make your decision if your strategy depends on refinancing into a lower rate. There are plenty of lenders here on the forum who could answer that for you. That's the one big red flag I see, other than potentially negative cashflow in the future. Depending on the area of Cleveland, I don't see rents rising rapidly so I wouldn't count on increased rents making up the difference.