Follower's Deal Analysis: House Hack
I had quite a few people reach out with deals they wanted feedback on, but before we get to the first one, I want to answer a good question I got from a follower regarding my last deal analysis newsletter. The question was, “how is there no PMI % on this deal analysis with a down payment of less than 20%?”
The reason there is no PMI is that the loan is from a portfolio lender, which just means that the bank is lending its own money. PMI is generally only required for agency debt, or federally-backed mortgages. The reason for this is because the banks aren’t actually lending their own money. They just sell the loan to Fannie or Freddie. However, in order for Fannie or Freddie to purchase the loans, certain requirements must be met, one of them being PMI. Since portfolio lenders aren’t selling the loans, they can make their own “rules” in terms of loan requirements.
Now, let’s get into this analysis.
A follower asked for me to review his potential house hack deal in Minneapolis. It is a 4-bedroom single-family house with an ADU. He plans to purchase the house with a friend, where his friend and he will each live in one of the four bedrooms, and the other two bedrooms will be rented to other friends, with the ADU also being rented.
Want feedback?
Do you have a deal you’re considering? Do you want me to take a look at it for you and provide feedback? Did you complete an analysis of a property yourself and want some feedback on the analysis itself? You can submit your deals and analyses for me to review by emailing the details to robert@therobertleonard.com
Overall, based on my resources, and having never been there, this seems like it’s a great area/location. The property seems to be in move-in condition and the rents seem to make the return numbers strong. I made an assumption that insurance would be $1,500 — that could be significantly off, but a similar property I own, albeit in a different part of the country, costs about that much for insurance. I also added water/sewer and electricity costs for the owners since it is not stated in the ad if the ADU is metered separately or not.
Please remember this is all just my opinion and how I would personally act. It should not be taken as financial advice and should not be acted on.
Based on my analysis, I would personally buy this property to house hack myself. The total monthly income should be around $2,400 with a total mortgage cost of about $2,250 — including taxes and insurance. That means the owners would get paid $150/month to live there. If money is set aside for reserves each month, that would be about $650/month, which would still be quite cheap to live. It also seems like it’d be quite a strong rental once I moved out, if I bought this myself.
You can find the house hack analysis on the “House Hacks” tab here. One of the biggest mistakes people make when buying a house hack is that they don’t consider the numbers when they move out, if they don’t sell it. Therefore, you can find the analysis of this property as a rental on the “Rental Property” tab here.
What questions do you have about this analysis? Questions about house hacking?
All the best,
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