Struggling with finding a deal in the Columbus Ohio market

[Jacob Novotny]

Hello BiggerPockets, 

I need advice (and a better realtor!)

First time poster. I'm a 25 y/o young investor looking to purchase my first house hack. I've been reading the books, and doing the research, but what I'm reading isn't matching up with what I'm seeing. 

Analyze this deal with me: 

240k purchase price, 2bd 1 ba duplex. ~800 feet per side with a basement. 

My lender came back with a ~$1900 a month mortgage price using a 3.5% down FHA loan.

One side currently rented for ~$950, based on rentometer I'm guessing I can pull around $1100. I believe my interest rate is a 6.25% with no points.

We'd live there for ~a year, then move to buy another house hack and hope to profit from this one. 

Based on the numbers - mortgage (taxes+insurance) alone is ~$1900, potential rental income from both sides is ~$2200, so $300 in "net" (yes, I know I need to put money aside for capex and vacancy and maintenance- I'm a handy guy so hoping to save a bit on that) 

Factoring in maintenance capex vacancy etc. purchasing this property would basically generate little to no profit. (Right?) Problem is, these types of "deals" are ALL I'm seeing. Family, friends, coworkers, basically everyone is telling me that it's not possible to profit on a house hack in this market. We're currently renting and I desperately want to stop throwing my money away. 

My realtor made me sign an exclusive contract that isn't up until July (my mistake) and he's not been the most helpful. He is encouraging me to stretch more to buy properties that are expensive like this where I'd lose money because he's speculating that rates will go down, and keeps telling me to stop reading biggerpockets books (lol). I think he just wants me to buy something and leave him alone. I don't think buying on speculation alone is smart, but I know the housing market is crazy right now.

Can someone give me some advice? I'm looking for what I would need to be considered a good deal (the number where I landed is total rental income-mortgage payment=$500+) and what you all set aside for capex and maintenance in Columbus? I just want a property that can generate me about $300-$500 of *profit* a month, so I can achieve my goals with my wife and eventually start a family.

REALTORS- if you have done house hacking or own a bunch of rental properties let me know! Judging by your response I will likely pick a new realtor for when my contract is up from this forum.

Thanks all!

[Jimmy Lieu]

Quote from @Jacob Novotny:

Hello BiggerPockets, 

I need advice (and a better realtor!)

First time poster. I'm a 25 y/o young investor looking to purchase my first house hack. I've been reading the books, and doing the research, but what I'm reading isn't matching up with what I'm seeing. 

Analyze this deal with me: 

240k purchase price, 2bd 1 ba duplex. ~800 feet per side with a basement. 

My lender came back with a ~$1900 a month mortgage price using a 3.5% down FHA loan. 

One side currently rented for ~$950, based on rentometer I'm guessing I can pull around $1100. I believe my interest rate is a 6.25% with no points.

We'd live there for ~a year, then move to buy another house hack and hope to profit from this one. 

Based on the numbers - mortgage (taxes+insurance) alone is ~$1900, potential rental income from both sides is ~$2200, so $300 in "net" (yes, I know I need to put money aside for capex and vacancy and maintenance- I'm a handy guy so hoping to save a bit on that) 

Factoring in maintenance capex vacancy etc. purchasing this property would basically generate little to no profit. (Right?) Problem is, these types of "deals" are ALL I'm seeing. Family, friends, coworkers, basically everyone is telling me that it's not possible to profit on a house hack in this market. We're currently renting and I desperately want to stop throwing my money away. 

My realtor made me sign an exclusive contract that isn't up until July (my mistake) and he's not been the most helpful. He is encouraging me to stretch more to buy properties that are expensive like this where I'd lose money because he's speculating that rates will go down, and keeps telling me to stop reading biggerpockets books (lol). I think he just wants me to buy something and leave him alone. I don't think buying on speculation alone is smart, but I know the housing market is crazy right now.

Can someone give me some advice? I'm looking for what I would need to be considered a good deal (the number where I landed is total rental income-mortgage payment=$500+) and what you all set aside for capex and maintenance in Columbus? I just want a property that can generate me about $300-$500 of *profit* a month, so I can achieve my goals with my wife and eventually start a family.

REALTORS- if you have done house hacking or own a bunch of rental properties let me know! Judging by your response I will likely pick a new realtor for when my contract is up from this forum.

Thanks all!

Hi Jacob, I've done the house hack route many times and have helped tons of clients do the same exact thing. I will let you know the goal of the house hack is to lower your living expenses, not to make profit (very very difficult to do). As long as it's lowering your opportunity cost from renting, then it's considered a good house hack. If you're looking for a house hack that will make you $300-500 of profit a month while you're living in it, that won't really be possible. You do need to look at it from an opportunity cost standpoint on how much it's saving for you versus renting.

On the other hand, I will let you know Columbus is not the best cash flowing market out there and it's more focused on appreciation than cash flow. If you're looking for $300-500/month after all PITI and reserves, it's going to be harder to find. However, if you're okay with $100-300 of net monthly cash flow after PITI and reserves, that is much more realistic. You do have to understand you're buying in a very high interest rate environment as well which means finding cash flow that much harder.

You have to understand that rates will go down and when they do, then you'll want to do a refinance and your property will cash flow $500/month+ but it will take some time.

The goal of real estate is to buy as many doors as possible and if it's positive cash flowing and makes sense in terms of the numbers, you should buy!

Just FYI - you can terminate an exclusive with an agent as long as you provide a written notice and if they don't cancel it, you can reach out to their broker.

Happy to connect and answer any questions you have!