House hacking a $615k fourplex in San Antonio
Do the numbers pencil out?
Happy Thursday and Happy New Year! Today, we're setting our sights on Texas to evaluate the investment potential of a fourplex in San Antonio. Let's dive in and see if we can make the numbers works!
Here’s the fourplex we’re looking at - it’s currently listed for $615k. The unit mix isn’t explicitly listed but, based on the floorplan, it looks like there are two 2bd/1ba units and two 1bd/1ba units.
The property, built in 1942, is situated in the heart of Tobin Hill, a San Antonio neighborhood known for its lively atmosphere, walkability, and rich history. All the units have been modernized with updated electrical, HVAC, and a new roof. The home is in great shape for its age. We’ll assume that we purchase the property for the asking price of $615k.
We’re going to make the following assumptions:
20% down with a 30-year fixed mortgage at 7% interest rate
1.82% annual property tax rate (based on San Antonio’s current rates)
$215/mo home insurance
10% reserve for capex and repairs
2% annual rent and expense increase
Two units of the property are currently occupied on long-term leases, and two units are active Airbnbs. It’s unclear which units are used for what, but we’ll assume that we live in one 1bd/1ba unit and rent out the rest. Given the property’s close proximity to downtown San Antonio, Airbnb could be particularly lucrative. Let’s run the numbers on renting out all three remaining units on Airbnb. Plugging our property into AirDNA and Rabbu, we get some differing revenue estimates. AirDNA suggests we’ll be able to make $35.8k/yr from one 2bd/1ba unit, while Rabbu says it’ll be $24.3k/yr. We’ll take the midpoint for our calculation and project $30k/yr for each 2bd/1ba unit. Doing the same calculation for the 1bd/1ba unit, we get a midpoint projection of $22.5k/yr. That means our total annual Airbnb revenue for all three units will be $82.5k. Since the Airbnb revenue calculation already takes vacancy into account, we won’t budget for it separately.
Plugging these numbers into our house hacking calculator (reply to this email and I’ll send you the link!), we get the results below.
The results are looking good! Our monthly outlay for mortgage + insurance + property tax comes out to $4,421. With our monthly Airbnb income of $6,875, we’re making $2,454/mo in gross profit in our first year!
We’re also setting aside $8,250 ($688/mo) in the first year for capex and maintenance. This is crucial given the property’s age and the wear and tear of Airbnb use. After taking this expense into account, we make $21,195 in our first year of living in the property. We also accrue $4,998 in home equity, so our total gain comes to $26,193, or $2,183/mo.
Making more than $2k/mo while living in your own private unit is a great result. The only downside here is having to actively manage the Airbnbs. It shouldn’t be too hard given you live in the same building, but it will definitely take up time. There are certain costs associated with running an Airbnb that I didn’t take into account, like software or supplies, but I think the results here are directionally accurate.
If you don’t want to manage short-term rentals, you could look into long-term leases but I’m less confident on the financial viability of them as compared to Airbnb. Medium-term leases to travel nurses could be an interesting play here - the property is just a couple blocks away from Methodist Hospital, one of the largest hospitals in the country based on available beds. Aya Healthcare, the biggest travel nursing agency in the US, currently has 62 travel contracts available in San Antonio, so the demand is there. To further diligence this, I’d go to Furnished Finder and check the pricing/availability of other properties listed for travel nurses in San Antonio.
Would I purchase this property? If I was living in San Antonio, yes. This seems like a great opportunity for someone who’s hungry for their first deal to roll their sleeves up and jumpstart their portfolio. You’ll live for free, cash flow more than $2k/mo, and accrue equity, all at the same time.
Thanks for reading! Catch you in the next edition!