House hack multi-unit? What ROI do you target?

Question

If you are living in one of your multi-family units, and want to pay less than market rent, it will reduce your cash on cash return.  Just wondering what others consider when deciding what to contribute to the property monthly.  I also ask myself the same question when deciding how much of a mortgage down payment to make in order to reduce the monthly operating expenses. Looking forward to some great advice.  Thanks!!

Virginia Hedges · Answer

Thank you,@Omar Khan and Christopher Gianninino.

Christopher Giannino · Answer

@Virginia Hedges

Since NJ is an expensive market, house hacking could be worth it even if you can't live for free but paying a fraction of your current rent/mortgage.  The savings from your reduced living expenses would catapult your money for future investments.

A suggestion I have is when analyzing deals, run the numbers 2 ways.. One way with you living there and one way when you eventually move out.  You'll be able to see whether its worth it for you in both scenarios.  Best of luck!

Omar Khan · Answer

@Virginia Hedges You should analyze your #s based on market rents. Don't discount the property just because you choose to live in one of the units. Analyzed based on total revenues and expenses. If you decide to move into one of the units, that is your personal decision but it shouldn't affect the analysis of your #s.

Virginia Hedges · Answer

So analyze using the $number of the rent you would charge another party, right?  Thanks for the post.

Mike Arlington · Answer

Hi Virginia,I think the common thing to do is that when you analyze the property, just look at the unit you'll be living in as if you were renting that unit as well.If you have a good deal based on all the units being rented, then you can consider it still a good deal if you end up living in one of the units.