All Forum Posts by: Nathan A.

You’re right that you can’t assume 100% occupancy, and you’ll also need to include costs for maintenance and capital expenses. The management percentage seems awfully high.

But all of those matters are details. It sounds like you’re trying to compare the return on renting against selling and using the proceeds in other ways. And one thing I think you’d need to add to your analysis is the total return on retaining the property — that is, the equity appreciation too.

If you buy a CD, when it matures you get back the nominal principal but inflation has eroded its real value in the meantime. If you keep the house over the same period, its value will hopefully track or outpace inflation and your heirs can inherit it. If you buy an annuity you’re receiving income but your heirs sure don’t get the whole annuity purchase price back at the end. So I think one thing you might need to add to your calculations is the projected value of the house over time and any anticipated rent increases. There are calculators that can help you. But whether renting or selling is appropriate I think depends a lot on your overall financial situation and your goals.

What about Philadelphia? It's on Dave Meyer's list of the top 10 cash-flowing markets.

Yes, you have the right idea that you'd need to offer far below asking. But before you do, it would be worth firming up your numbers. Look at some data on recent comparable sales yourself rather than just trusting the Zestimate to be your after repair value. You can also use the BP rehab estimator to get a clearer ballpark idea of repair costs.

Look at it this way: Would you be losing less money by doing the house hack than you would living where you are currently living? Now is an excellent time to house hack if the house hack lowers your overall housing cost compared to the alternative, even if you aren’t making money on top of the savings in housing cost.

This guide from Brandon Turner and this webinar today with Dave Meyer might be helpful starting points for buying a multi-family property to house hack.

In addition to a down payment, you'd need money for closing costs, holding costs, rehab and reserves (for vacancy, repairs and capital expenditures).

How much money you'd require for rehab for a BRRRR is really dependent on how much rehab the property needs, and could probably vary from $10K to $100K or more depending on the condition of the property.

I would encourage you to keep saving until you have more, or find an arrangement where a partner brings the money and you do a lot of the work (like finding the deals, handling rehabs or managing the property). While it's probably possible to get started with that amount (at least with FHA loans in the USA for owner-occupants), I wouldn't advise that in your situation. Even if you could get started with a very low down payment, you still need money beyond that for reserves to handle repairs and vacancy.

That's a cool goal! I would just strongly encourage you to keep your W-2 job until you have a few of them under your belt. Also, for flipping in this market make sure you have multiple exit strategies or build in a lot of margin for error in hitting your ARV.

In terms of money that you already have in the 401(k): A big disadvantage to taking out a loan is you often have to repay it in full if you change jobs. Check the details of your plan carefully to know whether that's the case for you, unless you're sure you wouldn't change jobs during the life of the loan.

About whether to invest new money in real estate or continuing to put money in the 401(k), I would definitely invest whatever minimum is necessary to get your employer matching contributions. Otherwise you're missing out on free money with an immediate, guaranteed return of 50% or 100% (or whatever percentage it is in your plan). Then you could use savings beyond the 401(k) for your real estate investing.

Here are some tips on estimating vacancy.