I'm on the hunt for a house hack in Philly, and seeking some advice for a duplex (3/1, 1/1) on the market. I need a gut check -- in this competitive market, where can one take some liberties to buy in the path of progress, live and wait. And where is such a strategy just "pie in the sky" thinking, and too risky of an endeavor when asking price is doesn't meet the 1% rule?
To clarify, my thinking would be to live in the 1/1 for a year or two while the neighborhood continues to improve and gradually increase rent. And while monthly cashflow is -$495, if I add that to market rent for the 1/1 ($950) then my girlfriend and I would only be paying $125 more than what we are currently paying to a landlord every month ($1,200) while building equity in a home in a neighborhood where prices are only increasing.
Am I being TOO optimistic? Or are these compromises necessary evils in hot metro areas?
This is a hot market and I do not know the Philly market but I wouldn't do a deal where I have negative cashflow. Dig deeper for better deals.
It looks like you’re basically paying $500 to rent it from yourselves. If you’d otherwise be paying $1200, then you’re cash flowing, in a very real way, $700/mo.
That’s $8,400/yr and it looks like you’re being sufficiently conservative in your monthly expense estimates.
$8,400/yr on a $27,500 outlay seems like a rock solid deal. If you don’t want it, I’ll take it.
To clarify, the 3/1 should rent for 1,200 and I have included rental income from the 1/1 into my analysis. I prefer to run the numbers this way so to see understand the financials even if I am not living in it.
Thank you, Jessica. What would you recommend asking of the seller? The house is rent ready, and was recently rehabbed.
Oh. Thanks for the clarification. I was going to say: that looked like a home run!
I’d say a 3% cap rate and negative cash flow are a big ‘No Deal’ from me.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.