What Are the Key Expenses in a House Hack?

[AJ Satcher]

Hello everyone! My fiance and I will be doing a house hack by summer 2022, we have been saving cash since July 2021. What are the major monthly expenses in a house hack? (Assuming we will be putting less than 20% down).

[Brandon Rush]

Hey AJ,

My wife and I are currently on our second house hack. The key expenses are the same expenses you will get with a regular rental property. Here are some of the big ones to name a few:

* Principal Interest Taxes and Insurance (PITI) - This will be your largest expense, obviously
* CapEx Repairs - As I learned as a newbie, CapEx is the secret killer of cash flow. Make sure when purchasing a property, you take into account when you will need to take care of CapEx items such as furnaces, roof, siding, cutting down trees, window replacements and other major items. Try to avoid purchasing an older property with lots of upcoming CapEx repairs unless you are getting it at a discount, able to build those repairs into your loan or getting money back from the seller.
* Turn Over - Another secret killer of cash flow for a newbie. If you purchase a building with apartments that are occupied but need renovation for a new tenant, turn over could cost can be relatively expensive. If a tenant left, will it need new floors, paint, appliances and etc. This is all stuff to keep in mind.
* General Repairs - There will always be something minor going on at the property, set aside a little big of your gross rents for monthly repairs, I go with 5%.
* Repeat Expenses - You will have a set of expenses that are relatively fixed amounts every month. Some of them include, landscaping/snow plowing, owner's electric, water/sewer, and a few others. 

One of the great things about house hacking is you can slip up, make a few mistakes and still recover relatively easily. You will learn a lot which will set you up to be a wiser investor as you start to pick up more investment properties. 

If you ever need any other tips or have questions about house hacking, feel free to reach out to me directly. 

Good luck on your journey and smart move going after the house hack!