First House Hack - Too good to be true?

Question

Just wondering what people think about these numbers. Is this too good to be true? Am I missing something?

• Rents: $2,750
• Less Vacancy: $137
• Effective Rent: $2,612
• 
• Taxes: $157.00Insurance: $85.00PMI: $213.00Maintenance: $137.50Cap X: $137.50Trash: $0.00Water & Sewer: $0.00Permits: $0.00Management $275.00
• 
• NOI: $1,607
• 
• Mortgage: $1,341
• 
• Cash Flow: $265 (10.6%)

Year 2 Cash Flow: $622 (24.8%)

Will Fraser · Answer

Hi @Sam Morgan, this is not at all too good to be true!  This is the goodness of the house-hacking strategy.  The one area I see that might need to be tweaked on your numbers is the Insurance line item.  I’d recommend getting a specific quote from an insurance broker for the property you are looking at so that you aren’t surprised.

A 4-plex I own make a good example:  because of the combination of factors with it (age, flat roof, being a 4-plex) the insurance costs are 3x what any calculator predicts it should be (because most calculator tools use area averages based on the value of the home, instead of the actual home in all of its glory).

Sam Morgan · Answer

@Bryan Noth I've been making most of the repairs these last two weeks, so I think 10% between Capex and Maintenance should be fine for the next few years. Utilities are build to the tenants. Power is split metered. I have a spreadsheet splitting the single water meter, and I'm prepared to litigate between angry tenants, but I don't see that happening either. I've been very upfront and transparent about the split.

@Will Fraser Thanks for this feedback. Actually, these are all real and current numbers. I just moved in myself a couple weeks ago and got all the leases signed Aug 01. I'm told by my insurer that once I move out (hopefully to do this all again next year), my premium will go up to $150... So, not too bad.

Bryan Noth · Answer

@Sam Morgan the line item allocation for Capex and maintenance depends on the condition of the property entirely.  No charge for trash or sewer?