House Hack and Rental - GA

[Jeff Brown]

Good morning everyone, I am looking at a property currently in North Georgia right outside of 285 Loop. Wanting full asking price at $370,000 and I am looking to Potentially how tax this new blank that's in a great school zone. The one of the current tenants is on a month-to-month lease and the other it has a contract until 2022 and they are both renting for $1000 a month. I believe with the great school zone that it's in and the area that it's in that you can up the rent to close to 1300 to 1400 bucks a month but not guaranteed. (after a fresh coat of paint and maybe some new flooring) I believe if I lived in one and rented out the other after one year I could move out and cash flow pretty well on this property, and get a 30yr. the only thing that I am concerned about doing is putting a large 10% to 20% down payment on this property knowing that I won't cash flow the first year because I will be living in it. Also not sure my COC return won't be great? My current expenses are about 2600/month where I currently rent.

Any thoughts on this deal or concerns? Should I pass and try to figure something else out?

[Ian Jimeno]

Hi @Jeff Brown, House hacking is a great way for you to get started in the real estate space. 

Let's look at some of the numbers. What would your mortgage be if you decided to house hack this property? These are rough/conservative estimates. I'm assuming this is a duplex since you mentioned two tenants.

With 5% down payment conventional loan (loan of $351,500) over 30 year term 

interest rate of 3.25% 

taxes 1.07%  of assessed home value ($4,000 annually) 

Home insurance of $1,500 annually

Your mortgage would be just under $1,988.08, but let's make it $2,000 conservatively.

Already, comparing to your current rent of 2,600/month, this is a nice transition. BUT! let's factor in the tenant's rent. If you can also generate $1,300 in income, your PITI (principal, interest, taxes, insurance) dropped to approximately $700/month if you house hack ($2,000 - $1,300 = $700 per month).

Optimally, you would find a property that you can live for free or even cash flow while living for free. Think about your goals and work out the numbers, and even get creative when thinking about renting out rooms, creating another bedroom, AirBnB, etc. 

Let me know what you think! feel free to send me a DM if you have any more questions. I'm a realtor here in Denver, CO and me and my team work with house hacking investors. Hope this helps.