All Forum Posts by: Aaron H.

Think of running the numbers as figuring out the total amount of cash you have coming in every month and the total amount of cash you have going out, in each scenario. Example:

You currently have mortgage + expenses for the duplex of let's say 800/m total, and you bring in 800/m from one unit. So you're at net zero.

Buy the SFR, your expenses go up, so you have e.g. 1000/m in PITI/expenses, + 500/m in rehab costs (spread out over 2 years) or 1500/m total, and now you're bringing in 1600/m in rent, so you're at +100/m better cash flow.

Whether it's a net positive move depends on adding up all the expenses and all the income for both scenarios.

Point is, when house hacking you're not just evaluating the property in a vacuum, you're evaluating the impact it has on your personal finances.

Click "Store" at the top of the screen :)

Nobody can answer that for you, it depends on your personal situation, finances, goals, etc. Start by reading the "Ultimate Beginners Guide" in the Education section at the top of the screen, that should help you start to clarify what you want to do.

Ask your friendly local agent w/ MLS access to run a search of recent cash purchases in your target areas - see if any names pop up repeatedly, those are probably active investors looking for cash deals.

Standard disclaimer it always depends on the specific numbers for the specific property, your situation etc.

That said, if you can afford it, buy the duplex :)

An 18% COC return seems decent, then. A lot depends on your goals and what kind of return you're happy with, but if you can take a property from break-even to 3K/m in net cash flow, you're adding a lot of value.

Just do the first deal and jump in - you'll learn more from the process of going through your first one than you will any other way (even if it doesn't go perfectly according to plan).

Otherwise, read a lot of books, walk through a lot of houses. Ask a more experienced investor or contractor if you can ride along for a deal or two to see how the rehab process works.

Population growth is a big one, you want to be somewhere that's growing, since that creates pressure on prices and rent long-term and ensures a stable tenant pool.

Price/rent ratio, average home price, and net job growth are several other things to look in to.

Consider getting David Greene's Long Distance Real Estate Investing book - it has a whole chapter on analyzing out-of-state markets.

If your monthly income numbers are your pro-forma rents after the rehab, then I think it's a terrible deal (less than 1% cash on cash return? No thanks...). If your monthly income numbers are "as-is", then whether it's any good depends on how high you can raise the rents after you finish renovations.

In the vast majority of markets in Southern California, your rental income on a 580K house is not going to be sufficient to cover your mortgage and your expenses, so you're likely to either be in negative cash flow territory or get such a low rate of return that your ROI is terrible. Let's say you even make $200/m - if you're sitting on 200K in equity, your return on that equity is like 1%.

Sure, you could use a HELOC, but you could also do that while still living in the house, so why rent it out? Plus, getting a HELOC on a rental property is going to be a lot harder than getting a HELOC on your primary residence.

I can't tell you what to do in your particular situation, but the odds are extremely low that an SFR in SoCal is an optimal use for your money. I'd vote sell it, recoup a bunch of cash, and find a way to invest in a higher-yielding asset in a different market (even if it means going with something more passive). Put another way, SoCal is a pretty bad market to be looking for BRRR-style deals.