Finding the right deal to start investing as a house hacker is challenging enough before the numbers are crunched. To make it easier for first-time house hackers, I have broken down three numbers I like to use to get a quick understanding of a property’s potential at a price that makes sense. Three things I review to quickly understand the potential value are the monthly payments, monthly rent, and reserves needed based on potential maintenance needs. When reviewing the monthly payment, I specifically focus on PITI or Principal, Interest, Taxes, and Insurance costs of the property. Mortgage calculators are easy to find online or while using one of the many home searching apps, it allows me to adjust the price and down payment to a number that makes it a deal for me. During this monthly payment process, I will also calculate additional fixed expenses like electric, sewer, water, and gas. Next, I focus on monthly rental income the property has under lease or via short-term rental records while running comparisons in the marketplace using the MLS (I am a Realtor in Philly and New Jersey) to get an idea of min and max rental income the property can generate. I like to run the numbers based on all revenue scenarios so I can get the best possible price for either situation. The third and final thing I focus on is reserves. I like to use the inspection report to help me understand the potential maintenance expenses that I will need to pay for in the future. Reserves are great for maintenance expenses and to additionally cover your property expenses when you do not have a tenant paying rent. Whether it’s your first deal or 100th deal as a house hacker, the numbers must work to make a deal worthwhile.
Top 3 Key Metrics:
- Monthly Payment – What do you owe each month that is a fixed expense? (IE: PITI, sewer, water, electric, etc.)
- Monthly Rent – Use Zillow, Redfin, and marketplace for market rental prices or MLS reports for rented averages
- Reserves – This is the key to everything. I, personally like to have at least $10,000 set aside for unforeseen issues
