Is a cash flowing house hack possible in Atlanta, GA with current inventory/rates?

Atlanta, Georgia
House Hacking
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Is a cash flowing house hack possible in Atlanta, GA with current inventory/rates?

Griffin Davis
Member since 2022 · 4 posts · 4 votes

Hi BP forum,

I am an aspiring real estate investor. I have listened to countless episodes of the various podcasts, read several BP books (Set For Life, Book on Rental Property Investing, First Time Homebuyer, and currently reading the House Hacking Strategy), and live on zillow haha. 

Pretty much every BP author or podcast host is a proponent of house hacking. I think it sounds great in theory, but the only way it seems possible to attempt a house hack in the Atlanta metro is finished basements, mother-in-law suites, or ADUs (very few if any duplexes, tri or quadplexes). And as I run high level numbers, I've yet to see anything that comes close to a cash flowing property. My wife and I are looking to purchase our first home late spring/early summer of next year. I would love to get her on board to house hack, but it is a hard sell when I can't show her any actual examples on zillow that line up from a numbers perspective like they tout in the house hacking book or on any BP podcast.

Has anyone out there found any properties in the Atlanta area that are actually cash flowing (as opposed to just a lower payment than I would pay in rent)?  My wife and I enjoy home projects. Would we be better off attempting a live-in flip strategy, forcing appreciation, and selling after 2 years?

Thank you in advance for your help!

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Christopher Jason LloydBusiness Member
Real Estate Broker · Newport News, VA · Member since 2020 · 95 posts · 83 votes
3y

In many markets, the ideal house hack is getting harder and harder to find but I always found this to be true after selling many househack properties to clients and buying them myself:

The more uncomfortable you are willing to get, the more money you can make in terms of cash flow.


Below are the different ways to make a househack work nowadays in my market and many others from most likely to cash flow to least likely to cash flow.  Notice that as you get more privacy and do less work, your cash flow will go down.

1. By the Room House Hack - Get as many bedrooms as you can to rent out.  You will likely find more deals that will cash flow while you live there on top of covering all expenses.  But as mentioned in the rule - this will be the most uncomfortable since you will be seeing your tenants in your kitchen almost every day.  Also check your zoning regulations to see if there are any restrictions for the maximum amount of unrelated occupants.

2. ADU (Live in ADU) - Rent out the home. It'll likely rent more than the ADU unless you have a unicorn where the ADU is nicer than the home. You will likely be living in the less desirable structure but numbers will look better.

3. ADU (Live in Main) - Rent out ADU. The clients that have made the most with this strategy is running an AirBnb out of the ADU. You live in the main home so turnover would be very easy to manage yourself or you could rent long term and just collect with less work. Less work, less money.

4. Multifamily - Good luck with cashflow.  At least in my market, people are simply looking to reduce their living expenses and are willing to pay way over because well... their mortgage will still be cheaper than the singlefamily.  They aren't analyzing the deal like you are which is why you are confused.  Your mindset on these properties is "well this is way to high priced, my cashflow is negative $500".  Their mindset "Oh my goodness, I only have to pay $500 per month to live here and all my other options are $1700+/month".  That is your competition and something to be aware of if looking for a 2-4 unit.  The play here is hold long term, value add and many will try and Airbnb or MTR a unit or two.

ADU's in my market are the most lucrative strategies if you find the right one. Just make sure it isn't falling apart and has its own: Water Heater, HVAC, Full Bath, Kitchen and Laundry. Also ensure there isn't some zoning restriction limiting what you can do with an ADU in your market.

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  • Julien J.
    Investor · CO · Member since 2016 · 757 posts · 1k+ votes
    3y

    The house hack strategy is not meant to cash flow. That's unicorn status.

    The strategy is designed to offset a significant part of your housing expenses while building equity.

    Think of it this way, if it cash flowed with you living in it, the property would have an enormous cash flow which would be picked up by an investor at a premium.

    1Reply
  • Griffin Davis
    OP
    Member since 2022 · 4 posts · 4 votes
    3y
    Quote from @Julien J.:

    The house hack strategy is not meant to cash flow. That's unicorn status.

    The strategy is designed to offset a significant part of your housing expenses while building equity.

    Think of it this way, if it cash flowed with you living in it, the property would have an enormous cash flow which would be picked up by an investor at a premium.

    Hi Julien,

    Thank you so much for taking the time to respond to my question! It’s good to know that a cash flowing house hack is a unicorn haha. All the same, in Craig Curelop’s House Hacking book, his example in the second chapter is of a house hack that not only allows someone to live for free but also to cash flow. It makes sense that the book would lay out the best case scenario.

    So with this information, I’ll modify my question for others who might answer to “How possible is it to find house hacks in the Atlanta, GA metro that significantly reduce living expenses or allow you to live close to free with the current levels of inventory/interest rates?”

    Thank you!

    0Reply
  • Julien J.
    Investor · CO · Member since 2016 · 757 posts · 1k+ votes
    3y

    @Griffin Davis

    Give it a few years of property improvement, rent increases on fixed debt and it will eventually cash flow.

    I'm a fan of the duplexes, if thats not in cards: more bedrooms and baths the better. ADU or DADU works wonders too.

    0Reply
  • Greg KurznerBusiness Member
    Real Estate Broker · Atlanta, GA · Member since 2016 · 200 posts · 75 votes
    3y

    Griffin, as others mentioned, my clients who are house hacking are doing it to lower their housing costs while building equity and increasing appreciation through doing improvements to the property before re-selling it and moving to the next opportunity. I don't think there is a realistic opportunity to house hack where your rental income will more than cover expenses, especially if you aren't renting out the entire property. An ADU or finished basement rental could provide a big dent in the monthly expenses.

    If you can afford to put 30%+ down so as to minimize the effect of negative leverage, your numbers look better just like with any rental investment.  When the property appreciates and rates moderate, you will be able to refinance and improve cash flow significantly or pull cash out for additional opportunities. 

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  • Benjamin Sulka
    Cleveland, OH · Member since 2022 · 826 posts · 578 votes
    3y

    Griffin,

    Thanks for sharing your story, brother. 

    I'm in a similar situation. My significant other and I are looking to purchase a duplex to house hack after we get married. 3-4 units that pass the self-sufficiency test seems to be few and far between. We are also open to house hacking a single family but this could get a little weird when you're living in the same place as your renters. 

    Our goal is to reduce our living expenses, boost our savings rate, and build some equity in a real asset that will be a rental once we move out. We currently pay $1,450 in rent and finding the right place would boost our savings. 

    Let's say we were to buy a $200,000 property with 3.5% down at 7% interest.

    Loan amount: $193,000 at 7% interest for 30 years

    $1,284 in principal and interest 

    +$400 in property taxes (estimate based on my area. I know its a crap ton)

    +$160 in PMI (estimated 1% of purchase price per year/ 12 months)

    +$100 in home owners insurance (also estimated) 

    =$1,944 in total expenses 

    Estimated market rent is $1,300 let's say. 

    Our total living expense for the month would be $1,944 - $1,300 or $644. This is $806 ($1,450-$644) that we are saving each month. We can take that money and reinvest it in the property every month instead of throwing it away on rent. 

    At the end of the day, what is most important is what your numbers look like after your move out. Make sure those numbers work after the property is fully rented and account for capex, maintenance, and vacancy. 

    0Reply
  • Griffin Davis
    OP
    Member since 2022 · 4 posts · 4 votes
    3y
    Quote from @Benjamin Sulka:

    Griffin,

    Thanks for sharing your story, brother. 

    I'm in a similar situation. My significant other and I are looking to purchase a duplex to house hack after we get married. 3-4 units that pass the self-sufficiency test seems to be few and far between. We are also open to house hacking a single family but this could get a little weird when you're living in the same place as your renters. 

    Our goal is to reduce our living expenses, boost our savings rate, and build some equity in a real asset that will be a rental once we move out. We currently pay $1,450 in rent and finding the right place would boost our savings. 

    Let's say we were to buy a $200,000 property with 3.5% down at 7% interest.

    Loan amount: $193,000 at 7% interest for 30 years

    $1,284 in principal and interest 

    +$400 in property taxes (estimate based on my area. I know its a crap ton)

    +$160 in PMI (estimated 1% of purchase price per year/ 12 months)

    +$100 in home owners insurance (also estimated) 

    =$1,944 in total expenses 

    Estimated market rent is $1,300 let's say. 

    Our total living expense for the month would be $1,944 - $1,300 or $644. This is $806 ($1,450-$644) that we are saving each month. We can take that money and reinvest it in the property every month instead of throwing it away on rent. 

    At the end of the day, what is most important is what your numbers look like after your move out. Make sure those numbers work after the property is fully rented and account for capex, maintenance, and vacancy. 


     Hi Benjamin,

    Thank you so much for taking the time to respond to my question! Also, congratulations on your upcoming nuptials!

    We share the goals you and your SO do (i.e. reducing living expenses, boosting savings rate, building equity, etc.)

    As you mentioned, we are also not interested in house hacking a single family by the bedroom. We would only be interested in a multifamily (duplex - quadplex), a single family with a rentable basement unit or mother-in-law suite, or a single family with a detached ADU on the property.

    The numbers you laid out make sense to me! I'm curious, do you see properties in the Cleveland area costing $200k and commanding $1300 in rent? Because in the Atlanta market, it is all but impossible to find any house that isn't falling apart for $200K, much less one with the ability to house hack in one of the ways we would desire. I also think it would be hard to demand $1300 in rent unless it was multiple bedrooms or in a nicer area. 

    I think what you laid out sounds like a dream. I would be very interested in doing it if the numbers you laid out were possible. I've just yet to see anything like it in my area and am curious if it is just unrealistic in the current environment or if people out there are finding opportunities that mathematically make sense and I just need to find the Michael Jordan of real estate agents haha.

    Thank you again for your help and input!

    1Reply
  • Benjamin Sulka
    Cleveland, OH · Member since 2022 · 826 posts · 578 votes
    3y
    Quote from @Griffin Davis:
    Quote from @Benjamin Sulka:

    Griffin,

    Thanks for sharing your story, brother. 

    I'm in a similar situation. My significant other and I are looking to purchase a duplex to house hack after we get married. 3-4 units that pass the self-sufficiency test seems to be few and far between. We are also open to house hacking a single family but this could get a little weird when you're living in the same place as your renters. 

    Our goal is to reduce our living expenses, boost our savings rate, and build some equity in a real asset that will be a rental once we move out. We currently pay $1,450 in rent and finding the right place would boost our savings. 

    Let's say we were to buy a $200,000 property with 3.5% down at 7% interest.

    Loan amount: $193,000 at 7% interest for 30 years

    $1,284 in principal and interest 

    +$400 in property taxes (estimate based on my area. I know its a crap ton)

    +$160 in PMI (estimated 1% of purchase price per year/ 12 months)

    +$100 in home owners insurance (also estimated) 

    =$1,944 in total expenses 

    Estimated market rent is $1,300 let's say. 

    Our total living expense for the month would be $1,944 - $1,300 or $644. This is $806 ($1,450-$644) that we are saving each month. We can take that money and reinvest it in the property every month instead of throwing it away on rent. 

    At the end of the day, what is most important is what your numbers look like after your move out. Make sure those numbers work after the property is fully rented and account for capex, maintenance, and vacancy. 


     Hi Benjamin,

    Thank you so much for taking the time to respond to my question! Also, congratulations on your upcoming nuptials!

    We share the goals you and your SO do (i.e. reducing living expenses, boosting savings rate, building equity, etc.)

    As you mentioned, we are also not interested in house hacking a single family by the bedroom. We would only be interested in a multifamily (duplex - quadplex), a single family with a rentable basement unit or mother-in-law suite, or a single family with a detached ADU on the property.

    The numbers you laid out make sense to me! I'm curious, do you see properties in the Cleveland area costing $200k and commanding $1300 in rent? Because in the Atlanta market, it is all but impossible to find any house that isn't falling apart for $200K, much less one with the ability to house hack in one of the ways we would desire. I also think it would be hard to demand $1300 in rent unless it was multiple bedrooms or in a nicer area. 

    I think what you laid out sounds like a dream. I would be very interested in doing it if the numbers you laid out were possible. I've just yet to see anything like it in my area and am curious if it is just unrealistic in the current environment or if people out there are finding opportunities that mathematically make sense and I just need to find the Michael Jordan of real estate agents haha.

    Thank you again for your help and input!


     Griffin,

    They do exist but aren't exactly easy to find, Lol. Most of these would be off market and scooped up by investors that have a lot of connections and pay cash. 

    I used easy numbers for the sake of the math. 

    Trying to build up my connection base so I'm in the loop if a property like this comes up. Establish a criteria that you want to stick to in terms of the numbers, build your connection base, and be ready to jump in seconds if something like this comes in your pipeline. It pays to know people and I've seen others get deals this way. 

    1Reply
  • Michael Dumler
    Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
    3y

    @Griffin Davis, what is your current living situation like at the moment? If you are renting and paying for someone else's mortgage, then please recognize the trade advantage of house hacking. As others have noted, the whole concept of house hacking is to simply reduce the cost of living. Do not expect the property to cash flow on day one. If you are currently renting for $2,000 a month and can acquire a single-family home to reduce your living expenses to a couple of hundred bucks a month, then that is a huge win in my opinion! Keep in mind, your downpayment is upfront equity to acquire the deal. While your capital is parked in the property, you will eventually see that money again. @Julien J. summed it up perfectly, "the strategy is designed to offset a significant part of your housing expenses while building equity." It's as simple as that, there's no need to overcomplicate the strategy. 

    If I'm not mistaken, Craig Curlop's first house hack was a duplex where he rented one unit, lived in the other unit, and rented the additional rooms via Airbnb. I think he even converted the living room into an additional bedroom. Needless to say, this is an extreme example of house hacking and most individuals do not have this kind of risk tolerance/comfort level. I'm sure your wife would not be in favor of this. 

    How have you been running the numbers? As you've mentioned, there are several different methods of house hacking. When you identify an SFH with an in-law suite, are you analyzing the deal using both long-term and short-term rental rates? Chances are the numbers will look different. Moreover, this really all depends on your budget and where you've been looking.

    Please let me know the following. Are you currently renting? Of the deals you have analyzed, how have you been running the numbers (STR vs. LTR)? There are always house hack deals on-market, you just need to work with an agent who has serviced house hack buyers before and knows what they're doing... I wonder who that could be.

    0Reply
  • Patrick Culleton
    Investor · GA · Member since 2018 · 20 posts · 11 votes
    3y
    Hi Griffin,

     It's not likely going to be easy, but it is possible to house-hack and break even or even cashflow a few dollars on a primary residence. The challenge I would have answering your question is just the last few words "current levels of inventory/interest rates"

    Current interest rates are making it difficult to keep your monthly payment low enough to allow cashflow. However, if you can house hack to reduce 50%-80% of your regular living expenses in today's market, I would consider that a win. Remember that rates will eventually come down, allowing you to refinance to a lower payment. Also, rates and values typically rise over the years, so it might be better to find something today that you can house hack and cover 75%+ of your expenses, knowing in a few years you will likely reach cash flow status or at least break even on the home. Then, once you move out and do it again, you will have a rental property already positioned to cashflow for you.

    Look for homes with 4 or more bedrooms, finished basements or in-law suites, or any additional space that you can rent out easily. I converted my own garage to create additional rooms when I bought my home to allow me to rent the rooms out and cash flow more. It was a no brainer for me at the time! Also keep an eye out for assumable mortgages that you can take over at a lower than current market rate. There are opportunities out there for those willing to look hard enough! Best of luck on your journey!

    2Reply
  • Griffin Davis
    OP
    Member since 2022 · 4 posts · 4 votes
    3y

    @Michael Dumler Thank you for taking the time to respond to my question!

    To answer your questions: 1. Yes, we are currently renting a 2/1 apartment in the Vinings area for $1700. 2. I've only been running the numbers as LTR mostly because I have read that the STR market is oversaturated, so a LTR seems more stable/easier to project. 3. We haven't quite gotten to the point of getting pre-qualified, but our combined income is ~$150K with very little debt and excellent credit scores. We go to church on the upper westside and are primarily looking for properties in Bolton Road area, Smyrna, and Marietta. I have yet to find anything in those areas where house hacking would bring our housing cost down even to our current rent. Maybe I'm not looking hard enough or I'm running the numbers wrong, but I would love to know if you have helped clients find these types of deals and make the numbers work.


    Thank you for your time!

    0Reply
  • Josh Bowser
    Real Estate Agent · Atlanta, GA · Member since 2020 · 416 posts · 233 votes
    3y

    Hey @Griffin Davis - I'm house hacking in Kennesaw with my wife and it has been a great experience. Well worth having roommates in our opinion and we're actually on the hunt to find another great roommate.

    Right now, you're going to have a tough time cash flowing in a house hack unless you're renting furnished rooms with ensuite bathrooms. Even then you would need that property to be a 4 bed / 3.5 bath.

    You could likely house hack a 3/2 or 3/2.5 in most parts of the metro and reduce your housing expenses < 1k / month.

    If you two are good with shared living spaces, then house hacking a SFH or a town home could be a great option. If you do not want shared living spaces, a live in fixer upper is another great option as well.

    Would be happy share my experience with all of these from an agent and house hacker perspective.

    3Reply
  • Christopher Jason LloydBusiness Member
    Real Estate Broker · Newport News, VA · Member since 2020 · 95 posts · 83 votes
    3y

    In many markets, the ideal house hack is getting harder and harder to find but I always found this to be true after selling many househack properties to clients and buying them myself:

    The more uncomfortable you are willing to get, the more money you can make in terms of cash flow.


    Below are the different ways to make a househack work nowadays in my market and many others from most likely to cash flow to least likely to cash flow.  Notice that as you get more privacy and do less work, your cash flow will go down.

    1. By the Room House Hack - Get as many bedrooms as you can to rent out.  You will likely find more deals that will cash flow while you live there on top of covering all expenses.  But as mentioned in the rule - this will be the most uncomfortable since you will be seeing your tenants in your kitchen almost every day.  Also check your zoning regulations to see if there are any restrictions for the maximum amount of unrelated occupants.

    2. ADU (Live in ADU) - Rent out the home. It'll likely rent more than the ADU unless you have a unicorn where the ADU is nicer than the home. You will likely be living in the less desirable structure but numbers will look better.

    3. ADU (Live in Main) - Rent out ADU. The clients that have made the most with this strategy is running an AirBnb out of the ADU. You live in the main home so turnover would be very easy to manage yourself or you could rent long term and just collect with less work. Less work, less money.

    4. Multifamily - Good luck with cashflow.  At least in my market, people are simply looking to reduce their living expenses and are willing to pay way over because well... their mortgage will still be cheaper than the singlefamily.  They aren't analyzing the deal like you are which is why you are confused.  Your mindset on these properties is "well this is way to high priced, my cashflow is negative $500".  Their mindset "Oh my goodness, I only have to pay $500 per month to live here and all my other options are $1700+/month".  That is your competition and something to be aware of if looking for a 2-4 unit.  The play here is hold long term, value add and many will try and Airbnb or MTR a unit or two.

    ADU's in my market are the most lucrative strategies if you find the right one. Just make sure it isn't falling apart and has its own: Water Heater, HVAC, Full Bath, Kitchen and Laundry. Also ensure there isn't some zoning restriction limiting what you can do with an ADU in your market.

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  • Benjamin Sulka
    Cleveland, OH · Member since 2022 · 826 posts · 578 votes
    3y
    Quote from @Josh Bowser:

    Hey @Griffin Davis - I'm house hacking in Kennesaw with my wife and it has been a great experience. Well worth having roommates in our opinion and we're actually on the hunt to find another great roommate.

    Right now, you're going to have a tough time cash flowing in a house hack unless you're renting furnished rooms with ensuite bathrooms. Even then you would need that property to be a 4 bed / 3.5 bath.

    You could likely house hack a 3/2 or 3/2.5 in most parts of the metro and reduce your housing expenses < 1k / month.

    If you two are good with shared living spaces, then house hacking a SFH or a town home could be a great option. If you do not want shared living spaces, a live in fixer upper is another great option as well.

    Would be happy share my experience with all of these from an agent and house hacker perspective.


     Josh, 

    I'd love to chat sometime. 

    My future wife and I are developing a strategy and trying to determine how we want to house hack. We are open to either buying a duplex or SFH. SFH is going to be a little bit tougher based on her comfort level with roommates.

    Let's talk about your experience! 

    All the best! 

    0Reply
  • Josh Bowser
    Real Estate Agent · Atlanta, GA · Member since 2020 · 416 posts · 233 votes
    3y
    Quote from @Benjamin Sulka:
    Quote from @Josh Bowser:

    Hey @Griffin Davis - I'm house hacking in Kennesaw with my wife and it has been a great experience. Well worth having roommates in our opinion and we're actually on the hunt to find another great roommate.

    Right now, you're going to have a tough time cash flowing in a house hack unless you're renting furnished rooms with ensuite bathrooms. Even then you would need that property to be a 4 bed / 3.5 bath.

    You could likely house hack a 3/2 or 3/2.5 in most parts of the metro and reduce your housing expenses < 1k / month.

    If you two are good with shared living spaces, then house hacking a SFH or a town home could be a great option. If you do not want shared living spaces, a live in fixer upper is another great option as well.

    Would be happy share my experience with all of these from an agent and house hacker perspective.


     Josh, 

    I'd love to chat sometime. 

    My future wife and I are developing a strategy and trying to determine how we want to house hack. We are open to either buying a duplex or SFH. SFH is going to be a little bit tougher based on her comfort level with roommates.

    Let's talk about your experience! 

    All the best! 

    I love that! I'll shoot you my number in the DMs and would love to chat. 

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