How to run the numbers on a House Hack?

Question

Hello BP Forum!

Relatively new to House Hacking here!  This past year my partner and I bought our first one as a 2 bed/2 bath turnkey SFH with a 60 sq ft 1 bed/1 bath ADU with a completely separate entrance and yard.  We are LOVING it so far.  The rent covers more than half of our mortgage and we love our MTR tenants.  We bought this first hack purely on emotions (didn't know BPs before) but now we'd like to buy another after we've lived here a year.

My question is - how do you run the numbers when its not as clear cut as a regualr rental property? How do you know you're getting a "good deal" when you will likely be paying for some of the mortgage on your own for the first year? We love the house we bought but want to do it right next time and not just buy it because we fell in love with it!

Thanks!

Marcus Auerbach · Answer

After 15 years of investing I am more of a "gut feel" buyer than running numbers. There is a financial reason for that: year 1 cash flow is a pretty poor metric for long term performance. So I think you did the right thing, you bought something that is desirable, will likely rent better, appreciate better and maybe one day sell better.

If you want to run numbers, just use both units fair market rent. A quality property will usually just barley break even, the more junk you go, the better the cash flow looks, never mind that long term capex waiting to catch up with you ;-)

G. Brian Davis · Answer

Hi @Cassandra M Stanton, nice to meet you here on BP! With house hacking, I’d underwrite it as if you were going to move out and rent the whole property in year two. For year one, just be honest about your “net cost to live” after rent. If that number feels like a win compared to what you’d pay anyway, that’s fine.

Kyle Hendricks · Answer

@Cassandra M Stanton

Congrats, that is so exciting! Me and my wife did the same thing and the MTR strategy has been huge. Househacks are a little harder to analyze because you are actually living in it, and quality of life is a metric you can't really track but is sooo important.

How you plan to structure is huge too, 2-4 unit, or another SFR with ADU, down payment, mortgage pmt, etc. For househacks, I love it if it allows you to live for cheap and then at least a breakeven after mortgage, capx, vacancy, reserves.

I am a lender that specializes doing househacks for clients nationwide and I love prioritizing quality of life because then worst case, if you have to live there longer than you want, you are still living for cheap, and in a place you love. (Which is an amazing worst case scenario lol)

Feel free to reach out as well and happy to help however I can!

Ryan Spath · Answer

Welcome to Bp and congrats on the successful househack. A “good deal” is subjective to each person, first define what this means to you. Are you snagging the 2nd property with a 5% conventional loan? If you are a good deal may be getting a duplex or another single with Adu that provides the following: You will want to underwrite it such that when you move out the property stands on its own. Meaning it pays for itself, covers vacancy, repairs, capex. Once you know this it becomes more clear with a deal is for you. A quick glance at your market, the accusation cost is high and so are the taxes and insurance. I would find an investor friendly agent that is familiar with the area and have them guide you, look for meet ups and tell folks what you are looking to do. RE is a relationship business and the better the relationships you have the better you will do.

Drew Sygit · Answer

There are MANY spreadsheets, available via Google, that help you analyze a rental property.

You'll just need to research & understand the variables:

1) Vacancy2) Maintenance3) Cap-Ex (which I personally ignore)4) Improvements5) Any utilities, lawncare, etc., that you choose to cover

One issue many newbies initially struggle with is running the numbers on a lot of properties that don't cashflow.

Well, you really want to lean to run the numbers backwards - start with the market rents and figure out what price you can pay to cashflow. THAT"S THE AMOUNT YOU OFFER!

Yes, sometimes your offer number will be waaaaay below asking price and an agent won't submit it. That's when you need to learn to say - NEXT😊!

Raymond J. Rodrigues · Answer

@Cassandra M Stanton reach out to @Josh Green. He has helped a ton of people do house hacks in the area and I am sure he can help you as well!

Jasmine Carter · Answer

Same boat here. I've run maybe 15 duplexes through the BP calculator and nothing cash flows if I plug in all the textbook numbers. But what finally clicked for me is that the real comparison isn't whether it cash flows on paper, it's what you're paying to live there vs what you're paying now. If my rent right now is $1,850 and a house hack drops that to $600 with someone else covering most of the mortgage, that's over $1,200 a month I'm keeping. None of the calculators really frame it that way though.

Tre DeBraga · Answer

Great position to be in. For the next one, treat the rental unit like a straight investment property first.

Pull market rents from HUD's fair market rent data or Zillow/Apartments.com to see what the unit can realistically fetch. Then run it through the BiggerPockets calculator — plug in your mortgage, property taxes, insurance, and don't forget maintenance, CapEx, and vacancy. People skip those and wonder why the numbers don't hold up later.

Whatever gap is left between the rental income and your total payment is your effective cost to live there. The goal is subsidized living plus equity — not necessarily traditional cash flow.

The BP calculator makes this pretty straightforward once you have your numbers dialed in. Know your property taxes going in — in some markets that alone can make or break a deal.

How to run the numbers on a House Hack?

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