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.

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