Does your first duplex (owner occupied) have to cash flow?

Question

Hi everyone, I’ve decided that I am going to house hack in order to get started in real estate investing. I have found a relatively cheap duplex that I believe will cash flow after the first year if it’s fully rented.

My plan is to live in it for the first year or the minimum required time, add some value to it, and then refinance to find more deals.

I have the funds needed but for the time I’m there it would be costing me around $300-$500 per month to live there. However if I move out after the minimum required time I’m positive it will begin to cash flow. Is this something worth pursuing?

Brett Picher · Answer

@Kevin Zolea

Yes this definitely makes sense, I currently pay $300 to live with my parents so it’s allowed me to save a lot of money, on the other hand I feel that why not start now if the monthly payments are around the same.

Brett Picher · Answer

@Dylan H.

Thats great to hear, I’m glad I can get some input from someone who is in a similar situation.

Awesome job cutting your expenses down as well!

Dylan H. · Answer

@Brett Picher I think it's a great way to start, and it's what I have done myself, although not a duplex. I bought an SFR that does not cash flow, but it cut my monthly living expenses to ~$300/month instead of ~$1000/month. Once I move out will be a little above the 1% rule and cashflow. My thought process is that as long as a house hack will cashflow after you move then it is a great way to get into an investment property with little capital.

Account Closed · Answer

@Brett Picher

I'd just make sure you do have some cash reserves and exit strategies for a worst-case scenario. See what kind of added value you can bring, what comps are as far as price and amenities so you'll know what you can charge and what it's worth. Best of luck!

Derek Harris · Answer

Is it worth pursuing? It depends. You should properly take into account all expenses to see if it still cash flows? A lot of people neglect property management (assuming they want to manage it themselves indefinitely), cap ex, maintenance, vacancy, etc. Biggerpockets has a very useful calculator. What is your minimum cash flow and does it meet that criteria? How stable is the market?

Always underwrite the market first. Look at job growth, population size and growth, etc. After you underwrite the market, then underwrite the deal. For me, it's all about Cash on Cash return. Just curious, what market is this duplex in?

Christopher B. · Answer

This is how I started my career and it was a big help financially in those early years. As mentioned in the thread just make sure it cash flows appropriately when both sides are rented. In the meantime why don't you rent a room on your side to a friend for $300-400/month??

Kevin Zolea · Answer

@Brett Picher @Troy Jones I agree with Troy. That is what I have been doing while looking for my first house hack. Just put my first offer in and if it's accepted I will be only paying $50 to live there and then once I move out in a year I should cash flow $200 if all goes well.

Troy Jones · Answer

I would evaluate it compared to how much it should save you compared to your current living conditions. If you pay $1000/mo and you're cutting your expense down to $500/mo great- you're able to save an extra $500 to invest later.

With your ultimate goal to use this as a long term investment once you're out, I would personally focus my math on the worst-case scenario. I'd look at the numbers on what you'll earn once both sides are rented to make sure that is positive, as well as making sure you won't go broke if your tenant moves out and you're carrying the mortgage alone.

Best luck!

Does your first duplex (owner occupied) have to cash flow?

Most Popular Reply