How do I analyze my primary residence?

5 Replies

I'm looking at a 3 flat right now and one unit I will live in and the other units I will rent out. This isn't a house hack situation where I'm going to rehab and then flip. I plan to live there for the long haul and it's turnkey, but I want to be smart about the investment. 

Any insights or tips on how to look at the numbers? I'm a PRO member so I can use the BP calculators. 

Thanks in advance

@Justin Johnson I don’t know where you live but invest most of your time in researching the rental comps in the area and see how much you’ll cash flow monthly. Overall the Math is pretty easy calculate your mortgage or whatever method you’re using to finance. Add in what your projected rent will be and see if that satisfies you in whatever goal you’re trying to accomplish. I don’t know what numbers you’re trying to hit but I will say the deals are often found when you put in the sweat equity and fix them up. It’s very difficult to find a desirable deal for something that is turnkey Especially when the market is reaching its peak.

I would use the BP rental property calculator.  It might be cash flow negative when you're only getting paid rent on two units, but that doesn't make it a bad investment unless it's going to cost you more than what you'd pay for housing otherwise.  

It would hurt to run the numbers both ways (renting 2 units vs. all of them), especially if all the units are currently occupied and you're going to have to wait for a vacancy before you move in.  Life circumstances can change, and if you find yourself needing a different living situation, you'll have peace of mind knowing that you can rent this place profitably.  

We all have to live some place. Better to have 2 tenants helping you to subsidize your housing costs and help build you wealth and than you paying rent to another investor helping to build his wealth.

Similar to what Russell says- what would your cost for housing be if you were NOT going to buy and live in this place? I bought a 3 bed SFR in Minneapolis a long time ago. I rented out two rooms, which covered something like half the expenses. That was fine by me because I got to live where I wanted and build some equity. Julie is right that you might want to see if you would make any money if you lived somewhere else, but again, balance that against what it would cost you to be somewhere else. I have a friend with a quad who has lived in all of the apartments at one time or another over 20 years and never plans to leave. (At least until she moves out of the country)