Can someone help me with this house hack analysis please?

Question

Hello, I'm new to real estate and like many others, I want to get my feet wet with a house hack property. My plan is to do this with a single family home with a detached garage or a smaller unit detached for me to live in. I'm using the four square method to analyze just the numbers on a property but as you can see I need help. If anyone could help, especially an experienced investor in the league city, or Dickinson, or southeast Houston area I would be REALLY grateful. I've attached my own excel sheet I made as i couldn't find an existing one so I apologize if it's not in the best format. ">My Excel Sheet

Eric Phillips · Answer

I would visit with a realtor and a mortgage broker. One of the main advantages of house hacking is to lower your down payment, and your interest rate. Both of your assumptions above are pretty conservative.

Regarding your Cash flow, analyze cash flows that change from your current scenario to now.

Cash-on-cash return is calculated by taking your cash flow and dividing it by your initial investment.

ROI on this project will take the cash flows you earn and add the equity increase in your property. Divide that by your initial investment.

Hope this helps in your analysis. I’d practice by going on HAR and finding a home that fits your criteria and then determining “your” purchase price. This at least will help you get good at quickly analyzing properties by researching tax info and potential rents.

Christian Villanueva · Answer

@Whitney Breedlove Wow, well like I said I am completely new to everything real estate and I took the taxes from a couple different people and sort of just averaged it out to that number. I never knew it'd be that high! So thanks for the insight on that. But that's okay I can work with this.. hopefully I'm not necessarily going for a $200k house, just looking more or less on how to properly analyze a deal. Also, I'm sorry I wasn't clear on my current living expenses. I rent out my current home with my two brothers and I pay $350 in rent (excluding utilities) so I average out to $450 a month. So regardless my current living expenses will be much lower than any house hack I think that I will find here but the point for me to house hack is to begin real estate investing. Though with that I would still would much rather find a good deal that keeps my expenses much closer to my current living expenses if not beat them. I've plugged in the new number you gave me for taxes which is 475 per month (wow) to my formula and my numbers are as follows. I put the changes to my previous formula as a bold font.

Property Type : Single Family 3 bed 2 Bath.

Property Price: $200,000

Down Payment of 5% at $10,000

Loan of $190,000 at 5% interest rate

Expenses

Taxes $475

Insurance $ 115

Electric $ 100

Water $ 70

Gas $ 50

HOA $ 0

Lawn $ 25

Vacancy $ 100

Repairs $ 50

Capx $ 100

Mortgage $ 1284.96

Total Monthly Expenses $2,369.96

"Cash Flow" (Didn't know what to title this section)

Out of pocket $1,069.96

Tenants Rent : $1300

Cash on Cash Return (This is the main part I need help with)

Down Payment $10,000

Closing Cost $3,000

Rehab Budget $7,000

Total Investment : $20,000

Whitney Breedlove · Answer

I'm new to this as well, so I'm going to leave the ROI analysis to others but, one thing I will say is that I think you're vastly under estimating the amount of taxes you will owe. Typically in Houston, taxes are about 3% of your home's tax appraised value. So if your house appraises for $190k, your taxes will be about $5700/year or $475/mo.

So your Principal and interest payments for this property would be $1020 (30 year mortgage at 5% interest.) Once you factor in taxes of $475/mo and insurance at $115/mo, your total monthly payments will be $1610 and that's before the other expenses that you mentioned. So if you can rent out two of the bedrooms for $500/mo you'll be paying $610 to live not including all of your other expenses. Considering you're paying $650 right now, I would look for a cheaper house, or something you can rent out for a higher amount.

Whitney Breedlove · Answer

So that link doesn't work when you click on it (at least for me.) Can you just post the numbers on your thread?

Christian Villanueva · Answer

I messed up on the "expenses" section but not with the numbers just a typo, sorry!

Christian Villanueva · Answer

@Whitney Breedlove thanks for the reply and nice to meet you! As for my numbers they are as follows. Keep in mind that my plan for my first property is to find a property that has a guest house of some sort detached from the main property. I currently rent a home like this now and the land lord rents out the guest house at $650 but since I'm house hacking I won't consider that as income. If anything I would live in one room and rent out the other two individually at around $500.

Property Type : Single Family 3 bed 2 Bath.

Property Price: $200,000

Down Payment of 5% at $10,000

Loan of $190,000 at 5% interest rate

Expenses

Taxes $150

Expenses

Insurance $ 115

Electric $ 100

Water $ 70

Gas $ 50

HOA $ 0

Lawn $ 25

Vacancy $ 100

Repairs $ 50

Capx $ 100

Mortgage $ 1284.96

Total Monthly Expenses $2,044.96

"Cash Flow" (Didn't know what to title this section)

Out of pocket $744.96

Tenants Rent : $1300

Cash on Cash Return (This is the main part I need help with)

Down Payment $10,000

Closing Cost $3,000

Rehab Budget $7,000

Total Investment : $20,000

Can someone help me with this house hack analysis please?

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