House Hack deal analysis

5 Replies

Hello BP Members!

I need your advice/help/input analyzing a house hacking property I am interested in. The numbers appear to be good but I want to get your take on this to make sure I am not missing anything. Thanks in advance!

Purchase price: $280,000

Down payment: $20,000

30 yr fixed @ 4.25% (No points)

Closing costs: $6000

Rehab: $2000

Principal+Interest: $1280

Taxes+Insurance: $600

PMI: $190

Vacancies: 5%

Repairs/maintenance: 5%

Cap-ex: 5%

Monthly expenses: $~2500

Monthly income: $2900

Cashflow: $400/month

CoC: 17.18%

A couple of things to add:

  • I have analyzed the deal as if we were not living because we will most likely move out after 1 year and keep it as buy and hold property
  • Both units are sub-metered electrical/water and tenants will be responsible for utilities
  • No HOA dues
  • This property is in a flood zone and will require flood insurance - I have been given an estimate of what flood insurance would cost on this property and have over-estimated generously on this expense
  • The property is in good shape, as far as we know their does not seem to be any major rehab issues. Just some cosmetic things to touch up (paint, kitchen cabinet paint, cleaning)
  • If the property sat empty, we would still be able to afford the mortgage payment rather easily.
  • It's not in a warzone
  • Property details: 3/2 single family + 1/1 detached cottage on the property that my wife and I will live in.
  • We will be self-managing

Thanks for reading I appreciate your input!

@Frank Macias - unless this is in an A+ area, your vacancy number is low. I carry 10% which is just over 1 month. 

Capex cannot comment on but what I do is I list everything I need to do in the next 5 years then multiply it by 50%. So I will need new water heaters, exterior paint, roof etc.

For Repairs & maintenance I do not carry a percentage but a fixed cost. Depending on size of unit it will be $1.50/sf to repaint the unit at every turn, $150 to clean it and another X to replace carpeting (Which is why i put LVT down). 

The numbers appear aggressive without knowing more about the property. Also Taxes and insurance are only $600 a year? are you sure about that? 

@Chris Seveney great tips! I like your take on planning and budgeting for cap-ex in the next 5 years, I'll have to incorporate that into my future analysis. Also, the expenses between tenant turnovers is also very helpful. We would like to have either tile or LVT in our units so carpet would be switched out if we bought it that way. 

And yes, property taxes and home insurance would be about that price. ~$2200/yr for taxes and about $5,000/yr for insurance. 

Thanks for the input, much appreciated!

@Paulina Macias - check it out. 

I would also account for property management. If you are planning on moving out in the future, it would be nice to not always HAVE to self manage. Check rates in your area to estimate how much.

@Frank Macias   I don't see anything missing.  No problem going conservative on the insurance estimate.  Agree with @David Whartnaby see if the numbers are still good enough paying for management.  Otherwise looks good, let us know how it goes.

Originally posted by @Chris Seveney :

@Frank Macias - unless this is in an A+ area, your vacancy number is low. I carry 10% which is just over 1 month. 

Capex cannot comment on but what I do is I list everything I need to do in the next 5 years then multiply it by 50%. So I will need new water heaters, exterior paint, roof etc.

For Repairs & maintenance I do not carry a percentage but a fixed cost. Depending on size of unit it will be $1.50/sf to repaint the unit at every turn, $150 to clean it and another X to replace carpeting (Which is why i put LVT down). 

The numbers appear aggressive without knowing more about the property. Also Taxes and insurance are only $600 a year? are you sure about that? 

This is great, any checklist you can share with regard to your process?

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.