House hacking breakdown help for Cash Flow?

Question

Hi, everyone!

I'm new to this and want to learn about the math here to see if either of these have cash flow opportunity. Can someone help me breakdown what they would take into account? I would be getting 3.5% FHA loan and would live in one of the units (the smaller ones.) Wondering if I can move from renting currently at $1,400 a month to buying a 2 flat for house hacking. I get the future appreciation and tax benefits come with owning but wanted to know per month if either of these have potential cashflow? THANK YOU!

1. 6030 N Claremont Ave Chicago, IL 60659
2. 6119 N Wolcott Ave Chicago, IL 60660

Ioana Coman · Answer

@Afrothiti Manolis

The most important is that your rents cover your mortgage and have a positive cash flow.

FHA 3.5% owner occupied:

6030 N Claremont Ave :

If you pay the asking price of $449,000 and you add the rents listed $1550 +$1285 =2835 ( gross income/month) , taxes $10453/year, maintenance 5% of rent per building/ mo and $1000 approx insurance/year. No vacancy, no property management fee, then your gross operating income is $2835 - $1096 (operating expenses ) =$1739 net operating income - $1898 Loan payment comes to — $159 negative cash flow.

If your rents are different then you might end up even. In this case negotiate the asking price.

Afrothiti Manolis · Answer

John- that's a wonderful question. I have to look into that@

@Jonathan Klemm I think you're right. Claremont's rent was also significantly higher with the same amount of bathrooms/bedrooms. I wonder why? They are 15 min apart so not sure if location would effect it that much?

Afrothiti Manolis · Answer

@Jonathan Klemm @Ioana Coman @John Teachout Thank you so, so much for your comments and attention (along with your grateful expertise)

1. Claremont $449,000

2. then this below is wolcott, which i think is a better deal 409,000

@John Teachoutundefined

Jonathan Klemm · Answer

@Afrothiti Manolis - I would likely guess property condition. Get inside and see whats going on.

Jonathan Klemm · Answer

@Afrothiti Manolis - At first glance, I like Wolcott better, but only cause it is cheaper and by the rent rate it seems to be in worse off condition.

Now, I picked Wolcott because it looks like a cheaper deal with more to fix, but if I were you and wanting to house hack then I feel like Claremont is the better deal. Either way, they both work for FHA, so maybe put an offer in on both and see what happens ;-)

Worst case scenario you don't get either, best case you get to choose between the two. Either way at least you are making offers.

John Teachout · Answer

On the taxes, is there just one collector of that? ie, I have properties that I pay county tax on and also city taxes. Make sure something like that doesn't slip through the cracks.

Jonathan Klemm · Answer

@Afrothiti Manolis - I agree with @John Teachout we need some more details and little more context here.

But similarly to what I tell everyone else, I would go for it either way and get the properties under contract. You can always get out. Right now people are a little more timid writing offers so I think it is a good time to be a little more aggressive.

While it is nice if your rental income covers your mortgage as @Ioana Coman mentioned above, I still believe the most important thing you can do is get started quickly.......your first deal doesn't have to be perfect!

Afrothiti Manolis · Answer

@iona

This breakdown was so helpful. I’ll advocate for a drop in price if I pursue forward and apply the same metrics to Wolcott. Thank you!

@John Thank you! I’ll apply the 1%rule

House hacking breakdown help for Cash Flow?

House hacking breakdown help for Cash Flow?

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