House hacking a $998k condo in San Francisco
Do the numbers pencil out?
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Happy Friday! This week, we’re diving into a condo house hack in San Francisco, and evaluating whether it’s a good investment.
Here’s the condo we’re looking at - it’s currently on the market for $998k and is a 4bd/2ba.
Nestled in the heart of San Francisco’s Mission District, this property combines urban convenience with residential charm. We’ll assume that we purchase the condo for its listing price. The condo was recently renovated, so we won’t allocate any money upfront for repairs.
We’re going to make the following assumptions:
20% down with a 30-year fixed mortgage at 7% interest rate
1.19% annual property tax rate (based on SF’s current rates)
$349/mo home insurance
$368/mo HOA fee
5% reserve for vacancy
10% reserve for capex and repairs
2% annual rent and expense increase
We’re going to live in one bedroom and rent out the remaining three. Based on room rental comps in the area, we can get around $1,500/mo for each room, bringing our total monthly rent roll to $4,500/mo.
Plugging the numbers above into our trusted house hacking calculator (reply to this email and I’ll send you the link!), we get the results below.
The projected financials for this property are pretty challenging. Each month, we're shelling out $6,651 for mortgage, insurance, and property taxes, but we're only bringing in $4,500 from rent. Adding in the $368/mo HOA fee, we’re losing $2,519 every single month.
Including the $675/mo expense for capex, maintenance, and vacancies brings our loss to $3,194/mo. Our equity buildup in year 1 is $8,110 - if we add that to our total loss, our year 1 net loss comes out to $30,215.
Our loss is so large that it’s unlikely we’ll be able to find a strategy to make up for it entirely. We could try renting out furnished rooms or Airbnb, but those would add around $1-1.5k/mo to the bottom line, in the best case scenario. That’s not even half of what we’re losing every single month.
Would I buy this condo? No. With San Francisco’s weakening rental market, this feels like a much worse choice than renting a room/apartment. If you can find a way to squeeze another bedroom out of the apartment by converting a room (e.g. dining room), then the financial picture changes, but, as is, the monthly loss is too large to stomach for me.
Thanks for reading until the end. Catch you next week!