All Forum Posts by: Derick Hanna

Sounds like you ran the numbers correct. House hacks in expensive areas usually prevent you from living entirely rent free. Is the amount you are short less than comparable rentals in the area? If so, it's a win. If you are only staying there a short time, you will move out and that will become your cash flow then. If it meets your ROI criteria when fully rented out, I say go for it. Because it will be fully rented out before you know it. :) Don't over analyze it or else that good deal will get snatched up.

Good luck! Excited for you!

I have house-hacked two fourplexes now and am currently living in the second house hack.  Take Michael Noto's advice and make sure you get the location correct.  In my opinion is is FAR more important to make sure you are buying in the right area than to get the most cashflow you possibly can.  Buying in a great location will help your property appreciate much better and your rents will grow more quickly.  Most importantly, having a great location will make it significantly easier to find good residents to rent your unit.  My first fourplex was in a C class area.  It took me one to two months to find a resident that met my criteria.  I went though hundreds of applications and only found a couple that met our criteria.  Most of the good ones didn't want to live in my neighborhood and therefore I was left with the high maintenance residents that couldn't get approved for a rental in a better area.  Almost all of my headaches were due to buying in a C class area.  A year and a half ago I found an off market deal on two B class fourplexes in a really great area.  I was able to sell my C class building and 1031 into the new properties.  My wife, daughter and I are house hacking in one and renting out the other 7 units.  Owning and renting these eight B class units is 1/4 of the work of owning and renting the four C class units.  We had our 1st vacancy in the new units last month.  We cleaned up the unit and listed it for rent above market just to see what happened.  We had a signed contract with a great resident that fully met our criteria within 9 hours of listing the unit for rent.  In DECEMBER.  Through experience I found the 3 BEST ways to make money in real estate.  Location, Location, Location.

@Derick Hanna This is the best way to look at a house hack when you are running numbers in an area that is desirable to live. You are basically using the rented unit to supplement you monthly payment as opposed to eliminating it. Having a place you and your family are comfortable living is most important and finding a place where the numbers work like this is the best of both worlds. 

@Derick Hanna I would just verify your numbers with other local investors in your market. I assume all of your expenses inlcude your mortgage, CapEx, vacancy rate, maintenance cost, property management fee (if you're not self managing), insurance, HOA, etc...? Are the water meters separated for each unit? If not, then you'll either have to fix that or account for utilities in your expense column. Overall, -955 per month is fine if the long term plan is to turn the triplex into a rental after a year. With all that said, have you put an offer on the property? Depending on your market, you could potentially be up against other competitve investors that are willing to put in all cash offers. Best of luck!

Hey Derick,

That sounds about right. As long as you are paying less than if you had a single family mortgage or renting, you are good. One thing to consider in your numbers is your insurance. Owner occupying the property will result in lower premiums. Once you leave, they may rise since it would then be considered an investment property. Mine premium went up $80 a month after leaving my first house hack. The bigger thing to focus on is your cashflow after you leave. With that $308 number, does that include property management? If not, I would be careful. Many people fudge the numbers, leaving out property management and believe they can self manage themselves. Also does it include repairs and CapEx savings? You better believe stuff is going to break, especially on older buildings.

I don't want to scare you too much, but you need to hear the truth as well. If you have any additional questions feel free to reach out. My wife and I are on our 2nd multifamily house hack and we have learned a lot. You have the right intentions, you will do well. 

Good Luck Derick!