Although it is possible to do with just a single family house (by doing a “live-in flip”), the phrase is more often used to describe the practice of buying a small multifamily property (a duplex, triplex, or fourplex), living in one unit, and renting the other units out.
• Close Monitoring of Your Investment: When you live in your investment property, keeping an eye on the property and making sure it’s running at peak performance is easy.
• Saved Expenses: Because you live at the property, you can manage the other tenants yourself very easily and don’t have to worry about paying a property manager who will do substandard work!
The Plan To start the first year, we will buy a triplex.
We’ll start small, because it’s our first property, though we could start with a two or a four-unit property.
Triplexes in this area run between $210,000 and $230,000, depending on the condition.
At this point, if the property were 100 percent rented out to tenants, it would bring in a total of $2,850 per month.
At this point, our expenses look like this: Mortgage: $1,200 Utilities: $230 Vacancy: $142.50 Repairs: $142.50 CapEx: $142.50 Total Expenses: $1,857.50 If you’ll recall, our total monthly income on this property with the other two units rented out was $1,900.
So our cash flow is as follows: $1,900.00 – $1,857.50 = $42.50 Now, we are not only living for free, but we are also making a small sum of money each month for doing so!
But in the case of house hacking, including this figure is OK, because you will not be living in one of the units forever, either.