What CoC ROI should I aim for when I plan to house hack?

Question

During the webinar Brandon mentioned that he shoots for an 12% CoC ROI on his rental properties. This makes sense if you can rent out all of the units. However this figure seems more difficult if I plan live in one of the units.

If I intended to house hack and live in one of the homes, what CoC ROI should I aim for?

Frankie Woods · Answer

@Brian Van Pelt means you should run your analysis as if you are not going to house hack.  If the numbers work for your criteria (e.g. 12% CoC), then your set.  Living for free or even having cash flow is just gravy.

The chances of you living in this place forever is small.  Eventually, you’ll either sell or turn it into a traditional rental.

Brian Van Pelt · Answer

@Santino LauricellaI would calculate a fair rental rate in for the unit you occupy,(Think of yourself as a tenant)

Frankie Woods · Answer

@Santino Lauricella you nailed it. Negative cashflow in a house hack is ok if the numbers work with you not living there. When I house hack, I actually "charge" myself market rent when running the numbers each year. It always makes me smile at the end of the year :). Besides, you have to live somewhere; might as well pay yourself first!

Best of luck my dude!

Account Closed · Answer

@Santino Lauricella

Maybe someone else can offer advice, but I would think that so long as the other tenant covers your mortgage payment (and maybe even some utilities), it would be a win for you as you'll be able to save money for another property while having your tenant build equity in the house-hacked property.

Disclaimer, I've never house-hacked.

Kris L. · Answer

@Santino Lauricella

You probably will have negative cash flow while you live there, but it should be less negative than the place you would’ve living otherwise.

Santino Lauricella · Answer

@Frankie Woods Thanks! Now if I can just land a new job to hold me over while I get my real estate journey started that will alsobbring me to where I want to be...

Santino Lauricella · Answer

@Frankie Woods Thanks for the clarification. The hope would be to move eventually but it makes sense that I should count me as a tenant. Even though I would have negative cash flow to start I would still have this if I wasn't house hacking. This way it's investing in a hopeful double rental.

Santino Lauricella · Answer

@Brian Van Pelt I understand that it makes sense to think of me as a tenant but I am not certain how this helps me achieve the "good deal" numbers since I will not be paying myself to live there I would still paying the lender and I feel like I would still have a negative cash flow.

What CoC ROI should I aim for when I plan to house hack?

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