My numbers work if I don't live in my investment, but not if I do... Is it worth it?

6 Replies

I am looking to buy my first property and I found one that I am interested in.  I'll have to owner occupy this property and house hack in order to get the financing I need to get my feet wet.

When I run the numbers fully rented, without me living there, it cashflows over $200 per door per month.  If I was to live there, I would be eating about $583 dollars a month (based on the percentages of one's unit income).

Each unit can rent out for $1400 and my expenses are only $1983 a month (this goes up with a $2800 a month income because the calculator bases its results as a percentage of the rental income at $2800 a month it estimates expenses to be $2,346.  It seems like If I was living there expenses would be the same whether I'm renting both units or one.  Does anyone have a more reliable way to calculate this?) but that includes vacancy rates, Cap Ex, Insurance, P&I, $50 Misc, Repairs costs, Trash, Taxes and Management fees.  I would be self managing to start.  So that is another $115/224 I would save in the mean time depending on the amount of rental income I input.  

My question is, is this still worth it for my first live in deal?  I can get more into the numbers if someone is interested in helping me analyze this further.

Thanks in advance for your input!

@Shamus Quirk

This is not an apples to applies comparison.

You need to drop the investment into your personal income-expense statement to really understand if you coming out ahead or not. You can't make a stand alone investment decision if your residence is part of your investment.

Thanks @Al Williamson , that makes more sense.  I am only planning to live there for about a year and then hold it in my portfolio as a rental.  I guess the thing to do would be to as you said, drop this into my personal finances for now as a residence and make sure it make sense, but also make sure that when I move out it still works as an investment.  

Hi Shamus, I'm in the same boat right now. I'm looking at a duplex for $134,000 with rent being $585/$600 with the $585 having a long term tenant living there. It is a VA loan so I would have to live there for one year as well and I would not be making any money for that year. In fact I would be eating $202.90 every month. But when I look at my personal income-expense sheet I am currently paying $600/mo in rent. See what I'm getting at? I'd be cutting my personal expenses by nearly $400/mo! Effectively only paying $200 in "rent" is a good deal for me, this opens up quickly paying off my school loans or perhaps save up for my next investment. Good luck!

If the rent you can get is $1,400 for each apartment and you are iiving there I don't see why you can't figure a fair market rent for your self as part of the income.  I assume you have to live somewhere and pay rent somewhere;

Of course if you are paying less rent then $1,400 I imagine you should just consider that amount For example if your rent now is only $900 then I guess your total income stream  would be only $2,300 instead of $2,800.  So if the numbers work figuring less income because you are currently paying less rent then  just go for it.    As you say you will be moving out in a year anyway.  You can always get a room mate in your own apartment and that would increase the rent flow and your bottom line.  

You don't need a PM because you will be right there managing your property yourself on a daily basis.

you just do the calculators as if you were not living there and then subtract the rent you would be "paying" yourself.

I think you are getting cought up by running the calculators as a triplex instead of a quad and that's what is throwing your calculations off.

@Shamus Quirk

  many benefits to this you get an owner occ loan and rates compared to non owner occ.

you get multiple doors for one of your 4 loan slots instead of buying a SFR.

and well I am not all that sophisticated when it comes to fine tuning a P and L.. I am really kind of a simple math guy..

for me I would simply look at this as  if its costing me 600 a month to live in a 1,400 apartment I am making 800 a month to the good that's far better than 400 a month in cash flow...

But that's just my simple way of looking at things...

I like this a lot for all young buyers and investor starting out. if you think about it. and if for example there are 4 plexs that would be pleasing to live in you could do this once a year for 4 years and end up with 16 doors. for your 4 mortgage slots... it gets much tougher to get loans after 4 as you probably know.. you need significant cash reserves etc once you go over 4... and you should have those of course.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here