There's this single family home I'm looking at. They're asking for 85k. It is fully renovated. Looks really good. The area is decent. Maybe just at mid class line. Any way so since I plan on house hacking it, where do I start in the analyzing process? And where do I determine? Thanks in advance.
So basically, you'd be renting out the extra bedrooms in your home? We do that.
I would suggest you get on a site such as www.roomates.com. Then search for the going-rate of bedrooms for rent in your area. Search on Craigslist too.
If you're only seeing things like basements for rent, then take that average rent amount and know that you'll need to be a little lower. Determine if you'll include or split utilities (we split utilities).
What is your goal? The rents will probably get you a nice break in your mortgage amount out of your own pocket each month. The big key is don't buy a house that you can not afford without roommates!
Nicole A., New Page LLC | [email protected] | 305‑537‑6252
Hi @Jonathan Perezyou have a great question there! I am sure @Brandon Turner has a book or something to help you answer that question. Ha! Honestly, I would look at it the same way that you would look at any other deal. 70% of the After Repair Value including estimating your repair costs hence the ARV term. So, if I found a house that would sell for $100,000 and it only needed paint and maybe a couple of rooms of carpet I would say:
$100,000 ARV * .70= $70,000
$70,000 then take out your estimated repair costs
-$5,000-$7,000 in repairs
Equals $63,000-$65,000 Maximum Allowable Offer or MAO.
If you can hit this type of formula and you can get an accepted offer using this formula then you should be good to go. My wife and I purchased our first home as an unintentional house hack. We paid more than the 70% ARV as we had not started investing yet. The ARV on our personal home is around $130,000 and we bought it for $105,000. It is going to need a new roof, and maybe an updated kitchen so we will not do that well on this. So, we may make a little money on it nothing to write home about but some money.
It is all about what you are comfortable with. I suggest looking at one of the deal analyzers above in the Resources tab to help you analyze any deal. You might want to look at the rental calculator to see if the home you are thinking about buying would make a good rental or not? I hope I have encouraged you if anything!
@Nicole W. So I was not planning on renting out the other bedrooms out. However, that sounds like it could be a good idea. I was actually planning on just living in it while I saved up another downpayment for another home (aiming for a multifamily) and then moving into that multi and renting out the other unit(s) as well as this initial single fam. So maybe I should analyze it as if I was going to rent it out?
Yes you should definitely analyze it as a rental. I would also analyze how buying and moving into it will affect your current cash flow (ie are you going to save money compared to the rent your paying). Every property you buy should have multiple exit strategies, so even if your plan was to live in this and then sell it to buy the multifamily, you'll want to know that it will cash flow or at least pay for itself if you have to or want to hang onto it.
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