Good or Bad Deal After Analyzing ROI?

Question

Hello BP World,

I been researching on this site preparing to make my first investment purchase in Long Island NY. Found a property i want to house hack with an owner occupied accessory 1 bed apartment. In 2 -3 years I plan to rent both units and repeat the process. Can you help me break down this deal to see if its a good investment.

Purchase Price: $380k

Taxes: $11,800 ($984/mo)

Down Payment: 5% ($19k)

Monthly Mortgage (including P&I, MI, HOI, Taxes): $2975/mo

Estimate Rental (low balling it)

1 Bed Room apartment: $1650

2 bed Room apartment: $2400 (This is the area ill be living in during my time there)

Estimates Total Rental: $4050

Utility Cost

Both units have their own separate meters so during my time their the only thing we'll share is the water. I estimate $450 for my utilities.

Joe Villeneuve · Answer

You're not investing...you're speculating.  In order for this to not be a loss, you are depending on future events you have no control over.

You can't count on the $2400 in rent from the unit you will be living in since you're not getting it now, and you can't guarantee when and even if you will ever move out.

That means you will be losing almost $19k/year while you're living in the house (how long?  Could be ?????).  Plus, you're starting out $40k out of pocket (DP + upgrades), which means at the end of the first year alone, you'll be about $40k behind...as in out of pocket...as in an $40k loss...  Plus, you will be adding almost $20k/year losses on top of that year after year, after year, after...

Conte Cuttino · Answer

@Joe Villeneuve

Thank you for your reply, what/how did you calculate to get to your decision as I will use it for the future investment.

I also look to put 20k in remodels (new bath , add a bed room and full bathroom to 2 bed unit) to increase the the value and will bring me to over 20% equity thus drop the Morgage Insurance of an estimated $115/mo.

Joe Villeneuve · Answer

Your losing money.  "Next".