Hacking House My First Property

[Demetrius Pettway]

Hello All,

Recently a seller accepted my offer on a duplex. My goal is to owner occupy one unit while renting the other. There is currently a tenant renting one of the units until April 2023. I currently pay rent of approx.. $670. The monthly mortgage on the property would be $1,415, the tenant pays $800 of that (under market rent in my area) a month. Does it make sense to go through with the offer? I would have to cover $615 in left over mortgage, which is about a $55 savings from what I am currently paying in housing. I wanted to decrease my housing expenses at least 50% or better. Obviously I can raise rent over time, and I know I’ll be in profit once I move out and rent the second unit. I’m just not sure if it makes sense, on paper, seeing how I wouldn’t really see a significant change in my fixed housing costs until moving out, renting the second unit, and possibly raising rents over time. Look forward to the responses. Thank you in advance. 

[Ben Scott]

I personally wouldn't look at the purchase as a cash flow play. I'd look at from the perspective you're paying down on an asset versus renting. The cash flow will come over time. Your worst cash flow will be the first 12-18 months you own a property while you get the units stabilized. 

[Charles Renn]

Hey @Demetrius Pettway,

There are many benefits from real estate ownership besides cash flow. It comes down to what your goals are in general. I'm no accountant but the tax benefits should be considered here as well as equity, even if it's small. My last bit of insight here is that don't think of your first investment as your best deal, but something that builds momentum and gets you in the game.

Hope this helps!

[Mackenzie Grate]

I agree with both posts above. Look past the short term. Buying a property is about reducing your tax burden, increasing your equity, gaining experience as a property owner, using leverage and locking in a lower interest rate for the long term AND ideally living for cheaper than you would. I'm not saying this is the deal of the century. That's for you to decide. But take a step back and look at the bigger, more long term picture. Will this benefit you in 2 years, 5 years, 10 years more than it would if you stayed in your rental today and paid slightly more?

Deals are often their worst in their first year... and they usually only get better from there barring some extreme circumstance.

Good luck!