House hack and rental numbers

[Suzanna Smith]

I'm looking for some feedback on my calculations, and for some insight from those that are working in the Seattle (or like) market right now. 

We have a luxury town home we are currently living in that we would like to convert to a rental, and are under contract for a SFH with a lovely studio apartment that we plan to make a 1 bedroom upon move in. We currently pay $3400 plus $250 for HOA (which includes W/S/G for the town home) and our projected payment for the new house hack home is just over $3900.

We listed the town home for $3800, but are only getting a few bites. We think we need to reduce it. We aren't opposed to subsidizing the rent if the long term makes sense. We expect/hope we can rent the apartment in the new house for atleast $1200 and likely $1500. 

Our current numbers have us up somewhere near $1,000 saved a month, plus equity. My question is, how low is reasonable to still make this a good deal and get the town home rented ASAP? 

[Michael Haas]

Hi Suzanna - although luxury town homes are low maintenance they can be very hard to cash-flow as rentals around here- just too expensive to pencil out as an investment property. Some developers do town-home rentals, but more often that is with purpose-built town home rentals units where they can control costs. 

Whats the bed/bath count and location on the town home? Happy to tell you what I think market rent and a fair price reduction would be but I'd need a bit more information. Once you factor in CAP-EX and your time you're already pretty close to negative cash flow at $3800 rent, so its up to you - there's something to be said for a bird in the hand, and you are paying down your loan, so that doesn't mean you need to sell it. Cashflow is pretty important to our personal strategy, but there are tons of other benefits to owning rental properties (loan paydown, tax deductions, security of a tangible asset, inexpensive leverage, ect).

Your property with ADU sounds great- nice find! We have six rentals around here and one in Alaska and just about all of them have an ADU / mother in law unit and great cash-flow because of that feature. I can't make a rental deal pencil within Seattle proper if there isn't a second entrance/kitchen/dwelling unit.