Does Hack needs to bring positive cash flow right away?

Question

Hi,

I want to run a question by the community and see if a Hack purchase, have to bring a positive cash flow right from the get-go.

I `m running my numbers, where I plan to buy a property (duplex, triplex), but somehow it doesn`t seem I can break even right after the purchase. It seems I need to move out from the property to start producing cash flow.

At the same time, if I live in the house I will be paying almost nothing for mortgage + the expenses (insurance, water, taxes etc).

So what do you think? Should I not focus so much on the cash flow right from the first month, but just find a property that will eventually start producing cash flow.

To add, I live in NYC, and I'm trying to work with the NYC market.

Let me know your thoughts.

Thanks!

Krystof Pilisiewicz · Answer

Hi @Jd Martin,

Currently I own a house and between my tenements and expenses I need to put 870$ towards my bills (that include everything: water, electric, cable, etc.) But at the same time, I live for $870, and I own $900K property that goes up 6% in value each year. However, If I move out from my current property and fully rented out, I will be making $1400 a cash flow that could feed my expenses in the second house that I`m planning to buy. But still, I would have to add about 200$ each month to the new property because I would be renovating it and will not be able to rent my basement (that`s about $900 in extra income a month) right away. So maybe instead of being focus too much on cash flow from the start, I need to buy the second house, put my money towards the bills for the first year before I find/buy a third house.

I think if I buy a third house, and entirely rent both of my properties I will be making around 2K each month in cash flow. Again, maybe I need to look for a big picture rather than tomorrow`s rent.

Hi @Christopher Phillips,

Thanks for your note! I put more details in above answer, so hopefully, that will make more sense to you. My struggle is, should I start thinking long term benefits later after a year or 2, or start cashing in right after the start? Of course, living in NYC might not help to get the cash flow right away.

Currently, I 'm looking for this cash-flow-right-after-the-first-month deal, but I might look and look. and never find it because of my market.

Christopher Phillips · Answer

@Krystof Pilisiewicz

Ideally, yes. You try to have it where you're living there with a positive cash flow, but that doesn't always work out that way if you use financing. But, the other way to look at it is: are you at least living there for less than owning a separate apartment/house?

JD Martin · Answer

A house hack that eliminates your current mortgage/rental expenses and lets you break even is bringing in whatever your previous costs were. If you are going from living for free at your parent's house or under the bridge at the interstate, you may be just even but have a better living condition. Either way, it is probably a positive for you.

Example: If you spend $1000 in rent right now, house hack and have a $1500 mortgage, $1000 of which is covered by renting space #2 you are ahead of the game. If you HH and have a $1500 mortgage and only $500 is covered by renting space #2, it is probably a bad deal. Those are 10 second simplistic examples.