Hello. I am new and looking into purchasing my first rental property, possibly a duplex to live in one side and rent the other. And possibly only live in it about a year then move on and rent both sides out at that point. When analyzing a deal like that, do you run the numbers for what it will be when both sides are rented since that is what it will be after the first year? Or do you use a rule such as the rental income needs to cover at least the mortgage, or.....?? Any advice on how best to analyze a house hacking duplex deal would be greatly appreciated! TIA!
I would analyze it based on what it would be cash-flowing once you move out and have both sides rented.
I would look at both. will the one side cover the the mortgage alone PITIA? and then what will both bring in when you move out.
Ok, thank you, both!
Eric, what is the A stand for in PITIA?
welcome to BP and congratulations on your decision to start your REI journey!
Welcome to BP @Jenn Chism ! If you're only planning on living in it for a year, see what the numbers will look like for that year. Compare that one side's income to your mortgage. You may be slightly negative overall for that first year, but that's not the worst thing. After that first year, calculate it for having both sides rented out - compare again to your mortgage, and see where you come out on cash flow (hopefully positive by this point).
Each investor will have different metrics they want before an investment is "good" in their eyes. Some strongly adhere to the 1% rule, while others are happy with closer to 0.6-0.8%.
@Jenn Chism I see you are from Missouri and not from LA or NY, so it should not be too hard to find a duplex with numbers that work. For a quality house hack in Milwaukee we have seen consitently about $500-600 between PITI and total rental income. And this is true for a 200k duplex as well as a 350k duplex, because the rents are higher. While you live there you will be cash flow negative, meaning that you still have to chip in a few hundred dollars for living there, however your principal pay down will usually make up for that. So it's like a forced savings account. If you have more questions about how this works I have a series of 5 YouTube video on my channel about house hacking and you can find the link on my BP profile page. Some things are specific to Milwaukee, but most of the information will transalte into any market.
@joshuanoth Thank you! Would you think in the first year, the whole mortgage should at least be covered?
@marcusauerbach So you're saying the whole mortgage wouldn't be covered, or I'd be chipping in toward other expenses?
Thank you for the info! I will look for your videos too.
Analyze based on what it will be once you move out. If it cashflows while you are living in it..even better.