House Hack Opportunity?
Fellow Investors,
My wife and I are trying to pick up our investing this year and we have decided to house hack if we can find a good deal in our area. We'd like to house hack for a couple of years then repeat. The following opportunity has come up:
4 Contiguous townhomes: Total sqft 8,965
Asking Price: $618K
Rental Income: $5,475 Monthly
Expenses:
Property Taxes - $8,146 Yearly/$702 Monthly
Insurance ~ $4,200 Yearly/$350 Monthly
HOA - $548 Monthly
*Property Management - 10% $548
*Maint - 5% $274
*CapEx - 5% $274
*Vacancy - 5% $274
The expenses listed above total $2,970 leaving $2,505 to service the debt just to break even which means I'd have to put 25% down to just break even (at FMV).
I have several other variables that can be incorporated. 1) I'm a veteran and would be eligible for $0 down on $424K of the loan. 2) We could exclude the property management fee since we will be managing but I always hear in the podcasts that it's best to include it in the analysis. 3) We would be selling our existing house to tap into the $100K+ of equity for the down payment. 4) We have a current monthly payment of $1,670 on our existing home. 5) We would not be purchasing at market value for this property since the numbers do not look that great above. 6) We have $50K of liquid funds to serve as reserves. 7) We also have additional funds in our IRA's that we can tap into if needed (yes, this brings up a whole slew of other issues which aren't meant for this forum).
Based on all of the above, if I lived in one of the units I would still be paying into the mortgage but not the $1,670 that I pay now. We would be saving around $1,200 which can be saved up to apply to future endeavors. We would also have the other 3 tenants helping us pay down the mortgage.
For those house hackers out there, what other things should I consider?
The numbers seem kind of tight in my scenario above, what asking price should I be comfortable with to make the numbers work?
Is decreasing my monthly mortgage payment by house hacking worth the risk above?
This is a long post so thanks for reading and providing feedback to a fairly new investor.