When is negative cash flow bad for house hacking?

3 Replies

I am currently looking for a deal for a duplex/triplex in the Savannah, Georgia area. I will be living in one unit and renting the others, along with opening up my portion for airbnb. I have analyzed multiple deals and I would lay anywhere from -$500 to -$1200 in cash flow. I have a very steady, good paying job. The question is; at what point in negative cash flow would you turn away from a deal?

@Connor Bause    Figure out what the cashflow would be if ALL the units are rented and as a baseline look for 1% rule minimum.....

I.E. The place costs $100,000    You know you can rent out each unit of the triplex for $350/mo each....That means FULLY rented it is generating $1,050/mo. That's just a GENERAL rule of thumb.

Also,....don't offer what they are asking on a duplex/triplex/fourplex because as an investment property, the seller EXPECTS people to come in at less than the asking price.

Finally....if you figure out that the numbers will not work for even a 1% rule when fully rented.....then find another property to invest in....

Connor, are you looking for a multi that is move-in ready or something that may need some work? I’ve been looking for multi-family for a client of mine in Savannah and can recall a few places that might fit your needs, but they require a good bit of work. I’m not sure if they are still on the market or not, but if you need help searching (even off market) let me know, I’d be happy to help.

Connor it's all about your personal tolerance and goals. How much of a house payment (neg cash flow) can you tolerate for your personal residence? What is your purpose in having a multi family home. 

Are you looking to subsidize your personal housing costs? If so the negative cash flow would need to be lower than if you were purchasing a single family home. 

Are you looking at eventually moving out and renting the unit you were living in? If so you probably want make sure the new rents would create a positive cash flow.

Are you looking for appreciation? Multi unit properties are not known for fast appreciation

Maybe you were looking to build equity so you could cash out on resale. You can refer to an amortization chart to see how long you would need to hold.

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