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Huge fan of house hacking. 1/11
Wanted to take a moment to reflect on my house hack from earlier this year and how I analyzed it. Numbers are at the end.
I was 23 at the time, no RE experience, just YouTube university and the Chandler David Smith calculator (free)
#ReTwit
Wanted to take a moment to reflect on my house hack from earlier this year and how I analyzed it. Numbers are at the end.
I was 23 at the time, no RE experience, just YouTube university and the Chandler David Smith calculator (free)
#ReTwit
and had spent about 6 months researching and making offers. This came about because I felt like I could never save enough money each month with my W2 between rent, car payments, insurance etc.
The way I analyze any big decision is what are the worst thing(s) that could happen?
The way I analyze any big decision is what are the worst thing(s) that could happen?
For me these were the three I came up with at the time:
1.I buy a duplex and can’t get it rented so now I would be paying the entire PITI myself
2.I buy a duplex with FHA financing and deplete my savings with the down payment and closing costs
1.I buy a duplex and can’t get it rented so now I would be paying the entire PITI myself
2.I buy a duplex with FHA financing and deplete my savings with the down payment and closing costs
3.I buy a duplex and a minor or major repair is needed within a few years from closing and I don’t have the reserves to cover it as well not being able to fix it myself (can barely screw in a lightbulb)
Here is how I went about addressing each of them:
1.I can mitigate this by making sure I can afford to cover the entire payment by myself with my W2 income if it comes to that.
1.I can mitigate this by making sure I can afford to cover the entire payment by myself with my W2 income if it comes to that.
Also I can mitigate this by trying to maximize the number of bedrooms so that I can have the option of having roommates or renting by the room on the other side. (Options are always good).
2. After networking for a while I was able to find a 0% down loan with no pmi. It had a higher interest rate (4.25%) but allowed to come to closing with only $4k (s/n: even if I didn’t find this I still would’ve went with FHA because the rent savings would be about $1200/mo)
3.The way I attacked this is only looked for newer duplexes that had been remodeled or new construction which would (ideally) eliminate any capex for the first few years
The numbers:
Purchase: $275k
Down payment: 0%
Cash to close: $3950
Size: 3/2 each side
Type: New construction from MLS
Rents when I move out: $2700 (number I used when analyzing)
Purchase: $275k
Down payment: 0%
Cash to close: $3950
Size: 3/2 each side
Type: New construction from MLS
Rents when I move out: $2700 (number I used when analyzing)
Currently I rent out each room on the other side as well the two additional rooms on my side:
Gross rents: $2785
Rent savings: $1200
PITI: $1886 (in the process of refinancing to $1730 per month)
Gross rents: $2785
Rent savings: $1200
PITI: $1886 (in the process of refinancing to $1730 per month)
Profit: $1500 per month after expenses
Cash on cash: >100% target I was shooting for
11/11
Cash on cash: >100% target I was shooting for
11/11
Feel free to ask any questions I’m still just figuring it out myself
