All Forum Posts by: Sam Hatch
Sam Hatch has started 1 posts and replied 2 times.
Quote from @Laura Shinkle:
@Sam Hatch here's the conundrum of all investors, whether you're buy and hold investments, BRRRR or househacking.
Interest rates have gone up and with it, your monthly budget for buying a home. In most places, the quick raise in prices over the last few years has outpaced rental rate growth. Most long term rentals don't cash flow unless you're putting at least 35% down in my area. So if you think about it, you're trying to buy something (presumably) with 5-10% down and then wanting it to cash flow as a long term rental in a year based on current rents? yeah, that won't work.
Go back to the reason for house hacking. The reason it's so great is that the owner occupied loan options allow you to put less money down (ie buy a home faster) than if you were buying an investment. Then getting roommates reduces your biggest expense in your budget, your living expenses.
No, it's probably not going to cash flow after year one unless interest rates plummet and you can refinance. OR, you can do what your market is telling you will work. Options:
1. Stay in the home more than 1 year. Sounds like this is the area that you want to live in, so why not stay there? Saving in rent/mortgage will allow you to save at a much higher rate, so you can purchase a strictly investment property either in your area or out of state if you don't like the options in your area.
2. When you move out, rent by the room. It's more work, yes, but if you'd prefer that to 'paying' for your investment a few hundred a month, then maybe it's worth the work.
3. Make it a STR. These are known to cash flow better, but are of course more work if you manage it yourself.
Keep in mind that your ROI is guaranteed negative if you continue renting, so purchasing a home will always be the better bet in my book. And don't forget the other returns, such as tax benefits, loan paydown by your 'tenants' and appreciation.
Who knows, maybe in two years, LTR rates will go up enough to make it feasible. Maybe you can do the rent by the room for a couple years and then convert to a LTR. Trying to force a certain strategy in your market may not work, so let the market tell you what strategy WILL work. And go from there.
Happy house hunting!
Thanks for the info!
The reason house hacking appealed to me wasn't because of the access to 5% down FHA loans, it was more of the loan paydown by tenants and the fact that I wouldn't be "wasting away" rent money every month. I'm in a fortunate position to be able to put 20%+ down on a 3-5bd home in my metro area, so given the larger down payment cashflow after I move out seems almost guaranteed if I do the rent per room strategy (based on some rough calculations). Transferring it to a LTR after a few years of rent appreciation would be ideal, but I'm fine breaking even on the cash flow aspect due to the other areas of net worth growth involved with this strategy.
Given I can put 20% down on my first property, I'm not sure if this is still a strategy you'd advise, or if it'd make sense to research other methods of real estate investing that suit someone in my situation better. Thanks!
Hey all,
I'm looking to purchase my first property within the next 6-9 months and was researching the possibility of house hacking it. From most of the SFH house hack examples I've seen, it's individuals getting seemingly good deals on 4-5 bd homes, or putting in a little extra rehab upfront, which allows them to have a positive net cash flow after they move out year one. I live in a metro area and would like to stay in this area, if possible, but I'm finding it hard to source any properties, even for example sake, that would allow the property to have a positive cash flow after I move out after the first year. Many 4-5 bd homes are going for 400-500k, while the rent for those are around 2.5-3k/month, leaving the mortgage + expenses to be higher than any potential rent from a single family. It seems like to make a majority of these instances work I'd have to continue to rent out room-by-room after year one, which seems like a tall task.
Wondering if anyone has had success in metro areas, and if so what you looked for when purchasing the home, and how you were able to maintain a positive cash flow after year one. Or if you're focused primarily on a positive net worth return, in which case I could see losing a few hundred dollars a month in exchange for loan repayment and appreciation worth it in your book. Thanks!