P&L question House Hacking

8 Replies

We are looking to purchase our first house hacking REI property. After all calculating with BP calculators, rules , COC ROI, we thought we found a perfect deal, but then this P&L statement came from current property management, and I don't understand that line item maintenance of almost 25K. I've requested more info.
Any thoughts? Should we consider making an offer on this deal with negative net income, or look elsewhere ?
Thank you for sharing any suggestions! 

A few facts:

2 duplexes total of 4 units 2BR 1Ba each unit. Current rent roll $2210 month 

Asking price 250K

Total investment 10K

I would ask for he last couple of years of P&L.  Maybe something happened that cause them to have higher than normal expenses this particular year.  Also, asking for more info should give you good insight.  If you are in the area and can do a drive, do.  Often times the condition of the outside of the property is an indication of the inside condition of the property also. 

Thank you. Thanks to your advice, I did request prior years P&L. We have been on Property site and inside one of units. We just don’t have enough experience to know by looking if there are major issues. If we put in an offer contingent upon inspection, How does that work? 

@Kimberly Best if you put in an offer contingent on inspection then you should be able to renegotiate or back out if need be.

Based on your numbers I’m guessing you’re somewhere in the midwest? Properties can be bought extremely cheaply but are often 80-100 years old and will have much higher cap ex/repairs and maintenance so budget appropriately. It sounds like they incurred a significant capital expense so id ask about

It.

Also, make sure you find a good inspector! See if you can find one used by other investors who you can trust.

Thank you Daniel! That's exactly what we are doing now is seeking a reputable inspector. We are actually in Southeastern area, and this deal truly is unusual and that's why I am interested but proceeding with caution. I appreciate you taking the time to give a newbie some direction. I'm excited to take this first leap into REI, but nervous too! I'll definitely keep you updated!

I just responded on Quora to another person lamenting about the expenses of his properties. His numbers were...essentially buying SFH for 30k and renting out for $600. Complaining about everything, how much things cost...

DUH! A roof on a 30k house probably has the same cost basis as a 100k house. A rental-grade fridge from Lowe's is $600, doesn't matter if your rent is $600 or $1000, you pay the same price.

Each unit appears to be renting out for $550 a month? A 2 bedroom for $550 a month?

I love the house hacking idea, but you're moving into a place with subsidized tenants, likely a class "C" area, and you're going to self manage? Welcome to nightmare land. Are you handy? Do you have experience managing properties/tenants?

As an investor, we make money when we buy. This deal appears to be a market value property with low rents, high expenses, and a lot of headaches. No wonder the seller is selling -- he's getting out of this headache. Unless the units can be rehabbed to rent for +$800 a month, what's the actual deal here?

See if you can find a duplex way under market value that you can rent out one unit, and live in the other. Start small. Don't bite off more than you can chew on your first deal. Get your feet wet on the operations of a property before you do a major deal.