How Hacking Analysis - Need Help!

[Jack Seilus]

Hey everyone, really enjoy this forum. I'm a new investor looking for my first deal. I'm running analysis for a house hack (most likely will be single family home & renting rooms long term). Do I run the numbers for when I'm living there to see if it will make sense? Or do I run the numbers for what the deal might look like when I move out in ~2 years after as the majority of the investment will be after I move out? 

I'm running into potential deals at -$700/mo cashflow, which I'm okay with right now. One of my concerns is forecasting for beyond the years I'm living there. 

Any resources/advice would be much appreciated - thank you!

[Sam Hudacek]

Hi John!

I would definitely advise running the numbers as if you did not live there. The reason being is because you will not live there forever and if you plan on holding that property for 5-10 years, you need to run the numbers as if it was fully occupied with tenants.

If the numbers make sense with a fully rented out property, then they will most likely make sense as if you lived there. Even if you're breaking even or cash flowing negative a little, with you living there and not haven't a full mortgage payment, that's already a great position to be in.

hope this helps!

[Nate Hemby]

@Jack Seilus You'll want to run both! See what it looks like when you're there AND when you've rented all rooms. If you're living there, your cashflow can be negative down to what you would expect to pay someone else for rent - hopefully better than that though! House hacking is about reducing your living expenses first, so if $700 is less than the rent you would otherwise pay, then the potential deals you're seeing would make sense to buy while you're living there.

The question is: what would your cash flow be once you move out? Real estate is a long-term game, after all. As long as you will be cash flow positive after all expenses (including management, CapEx, vacancy, maintenance) and/or seeing appreciation, it's a good deal. How good of a deal can depend on how you value cash flow vs. appreciation, but I'm guessing you're looking for cash flow as a new investor.

[Christian Ehlers]

Hey @Jack Seilus I would absolutely agree with the advice from @Sam Hudacek and @Nate Hemby here. Definitely run the numbers in both scenarios to make sure that you aren't going to be losing money every month on the property after you move out of it, because you will also have to be paying a mortgage or rent somewhere else as well, and adding a lot of expenses without the income to comfortably pay it is not a great strategy as a newer investor. 

I would ask what you are paying for rent now and put that into perspective for the -$700 per month while living in your house hack. If you are paying close to or more than that I think it is a no brainer to move forward! Definitely connect with a good investor friendly agent out there, as in some markets we are starting to see a softening where buyers are finally able to get closing costs credits, have inspections done etc, so take advantage of this!

Also the confidence you will gain by getting your first investment property and learning to manage it will be lifechanging for your investing! Once you get the first you will quickly be on to your next. Even if you are paying $700 per month to live there look at how much the market may appreciate and how much loan pay down you'll receive from the tenants every month! 

Good luck on your journey!

[Luke Quinn]

Quote from @Christian Ehlers:

Hey @Jack Seilus I would absolutely agree with the advice from @Sam Hudacek and @Nate Hemby here. Definitely run the numbers in both scenarios to make sure that you aren't going to be losing money every month on the property after you move out of it, because you will also have to be paying a mortgage or rent somewhere else as well, and adding a lot of expenses without the income to comfortably pay it is not a great strategy as a newer investor. 

I would ask what you are paying for rent now and put that into perspective for the -$700 per month while living in your house hack. If you are paying close to or more than that I think it is a no brainer to move forward! Definitely connect with a good investor friendly agent out there, as in some markets we are starting to see a softening where buyers are finally able to get closing costs credits, have inspections done etc, so take advantage of this!

Also the confidence you will gain by getting your first investment property and learning to manage it will be lifechanging for your investing! Once you get the first you will quickly be on to your next. Even if you are paying $700 per month to live there look at how much the market may appreciate and how much loan pay down you'll receive from the tenants every month! 

Good luck on your journey!

 As the only mortgage lender on this thread and as someone that prides himself on understanding the short term and long term of any deal I structure with my clients, listen to everything relayed in the above comments. They are spot on. Good luck with your journey and if you have any questions regarding how financing works, by all means, don't be a stranger. 

[Jack Seilus]

@Sam Hudacek @Nate Hemby @Christian Ehlers @Luke Quinn Just going to reply in one swoop here. THANK YOU! I appreciate you taking the time to answer my question. I appreciate the advice and feel more confident in my decision making because of it. Thanks again!

[Christian Ehlers]

@Jack Seilus Post about your progress! Would love to see it