Hey all, my wife and I have been looking to get into a multi family and house hack closer to work. I don’t know if its because we live in an EXPENSIVE area or because we’re trying to FHA a multi so the monthly debt service is astronomical, but every deal I analyze comes out cash flow negative. Am i putting too much aside for expenses causing every deal to look like a bad one? Or is the market just that expensive right now haha. Heres how i have a spreadsheet of mine broken down: Expenses per month: Maintenance: 5% of rent Management: 8% of rent (for after we move out) Vacancy: 5% of rent CapEx: 10% of rent Lanscaping/snow removal: $100 I know every case is different but whenever i run the rent through these expenses and then take into account PITI I come out negative. To give an idea multis around here go for $575k+ and taxes are hardly ever less than $11k. Rent estimates are just around $2300 for 2 bedroom 1 baths.

@Nick Causa You might want to go by dollar amounts rather than percentages since your rental income is so much higher than the rest of the country. Besides property management of course. I don't think you need to go over about $200 a month each for capex and maintenance unless it's a very old home or in less than ideal shape. You could probably adjust the vacancy down as well since I'm assuming the rental demand is pretty high in your area based on house values. Think about the whole house hack situation though. Yeah it'll be nice living there for cheaper while you are living there, but then when you want to move out and live in a single family, it will be a cash flow negative asset that you own if you plan to keep it. Unless you are banking on appreciation. Might make more sense to sell it and invest somewhere more favorable for cash flow once you wanted to move out.

@Nick Causa Your numbers aren't wrong it's just the area you are in man! I commend you for going that deep in on your due diligence and having the numbers and stuff laid out when analyzing the deal. It sounds like you aren't too happy with the returns you would be getting and I can't blame you. My 2 cents would be to either invest out of state and save money for that, or just suck it up and take down a property there even though it's not cashflowing. You are in a tough market so investing there isn't going to be very wise because most people are counting on appreciation which can be dangerous. A House hack would definitely be better than purchasing a single family home though, since it ideally should reduce your housing costs. Whatever you decide just make sure you keep looking at the numbers and think long term! Good luck!

@Nick Causa Your numbers aren't wrong it's just the area you are in man! I commend you for going that deep in on your due diligence and having the numbers and stuff laid out when analyzing the deal. It sounds like you aren't too happy with the returns you would be getting and I can't blame you. My 2 cents would be to either invest out of state and save money for that, or just suck it up and take down a property there even though it's not cashflowing. You are in a tough market so investing there isn't going to be very wise because most people are counting on appreciation which can be dangerous. A House hack would definitely be better than purchasing a single family home though, since it ideally should reduce your housing costs. Whatever you decide just make sure you keep looking at the numbers and think long term! Good luck!

@Jeremy Taggart @Michael Guzik thanks guys. Youre right Jeremy, not using percentages makes sense because i was looking at a property’s expenses recently and the owner spent $500 in the year for expenses. I had 5% of rent set aside monthly for maintenence which was $135/month. About a $93 monthly difference from the $500/year. Good to be conservative but not when it keeps you out of every deal im sure.

Michael, tes this place sucks haha. I am certainly going to look into out of state investing which is our next step but i want to get out of our apartment first. Paying rent to anyone other than myself really pisses me off. I just know if i buy an out of state property its going to keep us paying rent on our apartment longer because we then wont qualify for a duplex. So, trying to tackle this one first.