Cash flow calculations for owner-occupying a MFR

[Adrian Birchler]

Do you change your cash flow calculations when “house hacking”? I am very excited to get started in re investing with purchasing a 2-4 unit with an FHA loan and living in one of the units. I have been using the 50% rule and trying to get as close to the 2% rule as possible while analyzing properties. This often leads to decent cash flow ($100-$200 per door). However, this is accounting for all units being occupied and if occupying one unit this can be a loss of quite a bit of rent. When this rent is subtracted from the gross income I have a hard time finding properties that work out to cover expenses and mortgage. I hear tons of stories of others using this strategy and “living rent free”. So, I am wondering if the above factors call for making any kind of alterations to calculations when searching for a good deal or if the market I am in simply doesn’t allow for meeting all of these criteria. Should I hold off for a deal that does meet the above or find the best option available now and start building wealth?

[Joshua Hively]

@Adrian Birchler I also am in Columbus. Let me start by saying I am just now in contract on my first property in Clintonville. The way that I am running the numbers is as if all units are occupied. I have heard of people running the number not accounting for the missing rents. If you can find a unit where you can live for free that is awesome. However in our market, with properties on the MLS, in decent neighborhoods, I don't see it. Personally we are planning on using the vacant rooms in our unit as short term rentals, so I believe that will cover the difference. The other things that I take into consideration is that I otherwise would need to pay to live somewhere else and as a long term buy and hold guy, the length of time that I will be living in the property is a small percentage. I currently am pretty heavily networking in the Columbus area, feel free to reach out if you or anyone reading this wants to get together and chat sometime. Happy Thanksgiving!