Would love to get second look over my assumptions, challenge/reveal any flaws in my current plan, and listen to any suggestions to successfully house hack in Austin, TX.
Main Goal: House hack to live for free, cash-flow ~$150-200, have the ability to cash flow some after I plan to move out in a few years.
My situation: Newbie and aspiring real estate investor looking to purchase my first deal at the end of 2020 (Ideally November/December). Just hoarding cash right now to utilize a low 3.5% FHA downpayment. Checked with a local lender and got pre-qualified for a 299k loan (not sure how high my buying power truly is, I just entered that number in the application). I'd love to do the typical multi-family 2-4 unit strategy but don't think it's going to work out for me if I want to be in this market. So I ran the numbers (see below) for house hacking by the room in a 4/3+ SF home and seems to work for me. Given this strategy, the numbers actually work out for a lot of deals but that doesn't mean its right for me. I understand that there shouldn't be any emotion in an investment but since this will be my primary residence that I live in with my girlfriend and three roommates (two of which are my current roommates that I rent with and prefer to stay with). I am trying to find the right balance between something we want to live in and being a smart buy and hold investment.
I'm going to be a new investor and with no knowledge of construction, I was thinking that I'd want my first deal to be a newer home (2010+) so I can cash flow from move-in, low cap ex reserves to put away, and justify the rents to my roommates to move farther from the city than we are used to. Of course, I plan for the majority of my other deals to be value-add opportunity homes with a rehab budget but my main goal is to get started and eliminate my housing cost right now.
Location - Love this pocket in North Austin that's close enough to the city but relatively affordable:
Rent Assumptions in a 4/3:
- - Room #1 w/ personal bathroom: $700
- - Room #2 w/ shared bathroom: $600
- - Room #3 w/ shared bathroom: $600
- - Girlfriend sharing master bedroom w/ me: $450
Total rent = $2350
Deal Analysis on a 280k home:
Questions:
- (1) Although $127/month doesn't seem too great, with the low down payment I'm seeing 9.9% return not to mention my current rent savings if included would mean 62%/year return while I'm living in it. What I'm worried about is if I can't get it to cash flow when move out in 2-3 years. Any thoughts advice from the community here?
- (2) Are there any other house hacking strategies that others have found successful in the past year or so in this market?
- (3) Any assumptions I'm missing/wrong on my analysis (excluding utilities and HOA)?
- (4) Feel free to leave any other thoughts, comments, or suggestions.
