House hacking cash flow

[Jonathan Bebey]

Hello all, 

I am looking to house hack my 1st property in Phoenix, AZ. I am running the #s on properties and each one after I move out would have me Cash flow negative due to cost of houses right now in AZ and the current cost of rent. Of course, not everything is about cash flow, but if I want to repeat the process, I will still need to qualify for my 2nd loan. Anyone have suggestions on what is a good negative cash flow # or break even # as I'm putting in offers? Thanks!

[Lawrence Potts]

Quote from @Jonathan Bebey:

Hello all, 

I am looking to house hack my 1st property in Phoenix, AZ. I am running the #s on properties and each one after I move out would have me Cash flow negative due to cost of houses right now in AZ and the current cost of rent. Of course, not everything is about cash flow, but if I want to repeat the process, I will still need to qualify for my 2nd loan. Anyone have suggestions on what is a good negative cash flow # or break even # as I'm putting in offers? Thanks!

Here's a reality about real estate to consider in this market (most likely applicable to your local market but trying not to generalize all markets): you are buying an expensive asset that historically appreciates very well over time as a long term investment for very minimal down. And you have the opportunity to not pay anything to own this asset through rental income. On top of this, you are rewarded through the state and federal government for providing housing through tax incentives. If it doesn't cashflow positively, it's okay. I'm assuming your underwriting is considering maintenance, capital expenditures, vacancies, etc. But if you are able to break even, there's still an opportunity to win. It entirely depends on your goals and your financial situation.

@Sean Bozigian is right, you need to speak to your lender to see how this impacts your DTI for your future purchases. The last thing you want is to be stuck and lose your momentum. But @Eliott Elias also brings up a good point that as long as you are making enough to cover your expenses (and maybe more) than you are fine. Just remember that there are a lot more benefits to owning outside of cashflow.

We are missing some details to better answer your question though. You can still lose financially if you are negative or positive cashflow if you are bad with your money or bad at managing your assets. We don't know what you do for work, what kind of home this is, what kind of tenants you have (LTR, MTR, STR, etc.), and your goals. I'd feel more comfortable answering your question with more details to your situation. Obviously negative cashflow is not ideal, but it makes more sense for some people than others because of one's financial situation and current market.