Non cashflowing on owner occupied 4 unit FHA

Member since 2022 · 1 post · 2 votes

Hi all,
I am looking at purchasing a quad in a really nice area of Minneapolis (will never have a problem finding people and rents/property value is always increasing).

Problem is based on the current rents if I moved in and moved someone out I would definitely be losing money ($650-$1200 depending on roommate or not) and the building is 100 years old so there will be general upkeep and expenses.

Has anyone else negative cash flowed on a property for a period of time before it eventually turned around? I think once I move out I will clear maybe $400-$500 a month profit after increasing rents to the area standard. And property value I imagine will keep going up as well.

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Daniel Anshus

Realtor · Bloomington MN (bloomington, mn) · Member since 2016 · 451 posts · 263 votes

@Will Gleason in the Minneapolis market you are almost never going to find something that cash flows while you live in the property. The point of house hacking is to lower your monthly expenses (have your mortgage payment less than your current rent) and get started in investing with a low down payment option.

You should be saving 5-7% for both capex and maintenance minimum, on these older properties. Is maybe clearing 4-500 a month actually profit after 10-14% for maintenance, capex, and at least 3% for vacancy? And most investors I speak with are looking for a minimum of $200 a door after all expenses. So, I would say $500 a month for a 4 plex isn't a good investment. But, if it is your first deal and it's a good building in a good area, it could be a great first step. The first property is the hardest but, once you get the first one done you will learn so much from it and will be thankful for it.

Hard to tell you yes or no without seeing the property, your numbers, your goals etc. This is where you need to lean on your agent to make sure you are making a good decision.

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Tim SwierczekPro Member
Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Will Gleason I help around a 100 people per year house hack and nearly all have negative cash flow while living in the property. Don't let the podcasters fool you, they only have the mega exceptional cases on air. 99.5% of all house hackers are negative cash flow while occupying. You need some cash flow when you move out and your cash flow should grow the longer you own it.
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Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
4y
@Will Gleason rent one unit on a monthly or STR basis and increase the cashflow. Also, I've never had a househack cashflow while living in it and have always had to accept lowe rents while getting it turned around.
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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
4y
If you're paying less each month to live there than you would to rent somewhere else...isn't that cash in your pocket? You're buying a home to live in. Yes you're also trying to do so with an investment mindset, but don't ignore the fact that you're doing this so you own your home. That doesn't mean you should or shouldn't buy this home, but just that you're not only buying this for investing purposes.
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Daniel Anshus
Realtor · Bloomington MN (bloomington, mn) · Member since 2016 · 451 posts · 263 votes
4y
@Will Gleason in the Minneapolis market you are almost never going to find something that cash flows while you live in the property. The point of house hacking is to lower your monthly expenses (have your mortgage payment less than your current rent) and get started in investing with a low down payment option.
You should be saving 5-7% for both capex and maintenance minimum, on these older properties. Is maybe clearing 4-500 a month actually profit after 10-14% for maintenance, capex, and at least 3% for vacancy? And most investors I speak with are looking for a minimum of $200 a door after all expenses. So, I would say $500 a month for a 4 plex isn't a good investment. But, if it is your first deal and it's a good building in a good area, it could be a great first step. The first property is the hardest but, once you get the first one done you will learn so much from it and will be thankful for it.
Hard to tell you yes or no without seeing the property, your numbers, your goals etc. This is where you need to lean on your agent to make sure you are making a good decision.
4 Reply
Kurt Pauley
Realtor · Minneapolis, MN · Member since 2016 · 245 posts · 107 votes
4y
@Will Gleason This is very common. Focus on how it will perform once you move out of the property. The benefit is to live cheaper than it would be to rent and also participate in the appreciation and equity building.
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