House hack: First deal? Or no deal?

[Horace Grant]

I’m located in a competitive market and am wondering if this is a good deal. The current cashflow is poor as the other side is rented for $1200. Market value rent is $1500-$1700. What’s intriguing is that it’s an off market deal and the assessed value is greater than the purchase price.

Purchase price: $357k

Assessed value: $386k

Loan: 7 year ARM at 5.625%

Initial cash invested (10% down payment and closing costs): $42000

PITI: $2800 (property tax is around $8300)

Capex: $500

Potential rent: $3000-$3500

Potential cash flow: negative $300 to positive $200

Current rent on tenant side (lease is up September 2023): $1200

My responsibility (without capex): $1600

Not sure what to do here. I mean, the cashflow numbers make it pretty clear that is not a good deal. However, there would be instant equity built.

What do you think? What am I not thinking of? What would you do?

[Chris Davidson]

@Horace Grant what is your current rent? Is it in a good area, do you like the property? Can you get a roommate and knock down your contribution to make it less intensive until you get to up rents on other side?

What work needs to be done to get market rents? 

I would answer these questions and if I liked the direction of them would move forward and if not move on to the next one. Check the ARM terms as well a fixed balloon might be better as you know rates are going up for the next year.