https://www.biggerpockets.com/calculators/shared/727721/dbf63673-ed94-4e19-a8cf-6822e29ea85d
Thank you everyone :) @Tyler Barker This isn't exactly a buy & hold, it's really more of a house hack but that wasn't a classification option. However it also works as a buy and hold given the location, and it also works as a full time rental property as well (for either AirBnB or a traditional rental property given it's walking distance proximity to a great school). It's why the numbers are kind of so-so if you look at it from any one specific angle, but I like the diversity this property has and how it's a blend of all the categories since that's what I needed. I can dabble in all of the methods with this house which will be a good way to learn, and then I can apply what I learned to multifamily once I've saved up. It also has a bit of an exit strategy built in since if I decide AirBnB sucks and I hate dealing with that bs, after a year I can rent it out traditionally. Worst case scenario it works as a starter home since it's less than what I was paying for my rental property. I'm very risk adverse and feel more confident in my first purchase given it's flexibility.
The 2% rule is a guideline for a rental property that's saying like monthly rent should be around 2% of purchase price. Don't quote me on that, I am obviously NOT an expert by any means. Who knows, this thing could be a total money drain and I could fail big time (although I suspect I won't). So like, to hit the profitability of the 2% rule, given my purchase price of 185k, I'd want a property that ideally rakes in 3.7k/mo. Now, a lot of people think it's really hard to find a property that meets this standard, definitely the hotter the market the harder it is to find. A more C neighborhood or affordable area (maybe rural midwest etc) you are more likely to meet 2% but certainly it can be done. The way I view this property, it hits 0.87% which could be higher but I am ok with it. If I were to factor the money I am saving by not spending rent it hits 1.53%, but it's not smart to do that because that's not new income generated that's just redistribution of funds (but it's why I'm ok with this not hitting 1% fully). Depending on bathroom rehab costs it hits in the 0.87 to 0.89% range.
You're not missing anything, I'm just applying a lot of different formulas at this. It also doesn't meet the 70% rule for the fix/flip method due to the check I cut to wholesalers, which I already knew and had pointed out to me via constructive criticism. Again, getting paid $500/mo to live rent free and essentially run a hostel is probably way too much of a pain for most people, but I'm ok with this. For AirBnB to cash flow I would say you want to have higher profitability since they take a 3% cut and there's the risk that a guest could damage your property, your time is money and if you're cleaning you ant to account for that etc etc.
I also will be experimenting with designing a permaculture system in the backyard, so more than just my financial equity builds. If I plant fruit trees/sustainable ecosystems that essentially run on autopilot for a few hours of yardwork a month now, in a few years I'll be able to significantly reduce on grocery costs as well, which will help me save even more money, as well as build a more favorable local ecosystem and potentially get tax credits. I know this sounds like hippy dippy bs but I've seen it accomplished very successfully. At the very least if I decide to sell, it will be a competitive advantage.
Lastly, I opted for less cash flow to have something in a better location because either myself or a family member will always end up living here. It's across from a large park which will probably never be developed, 1 min walking distance to a Physician's Assistant school, walking distance to a private school and a 12min walk to downtown. There's a bus stop on the block so if I lose my job/car I can still have affordable transportation and down the street new townhomes are being built starting price of $750k (2 blocks away there are condos being built starting to sell at $850k). Across/on the street has about 3 or 4 large estates owned by Duke with sprawling lawns that will always be well maintained. When speaking to some people that house hacked prior to the recession one of the things I noted was that some of them got "stuck" in their properties but the ones that loved where they lived never minded this even when times got tough. Tim Ferris also said on a BP podcast that he only buys real estate that inspires him. That's a luxury, but I think location for a place I could get stuck living in is important and I'll focus more on hitting the 2% rule on my second purchase.
