Perspectives on House Investment
The Positives of Your House Hack
Rent Savings Offset the Negative Cash Flow
- While you're technically cash flowing –$445 monthly, the $1,400 saved from not renting means you're net positive compared to your previous situation.
- Over the long term, this model can pay dividends as your property appreciates, rents increase, and you pay down the mortgage.
Building Equity Instead of Renting
- The $30k down payment and $30k renovation investment are now part of an appreciating asset.
- With every mortgage payment, you're building equity, unlike renting, where that money would be unrecoverable.
House Hacking as a Low-Risk Investment
- By living on-site and managing the property, you're reducing vacancy risks and maintaining control over your investment.
- In a medium cost-of-living area, this is a strong way to leverage real estate while mitigating the risks of overextending.
Concerns You’re Facing
Rising Home Prices vs. Rent Increases
- It’s true that home prices in many areas are growing faster than rental rates, making subsequent house hacks more challenging. However, this doesn't invalidate your current strategy—it just means you need to adapt to market conditions.
Cash Flow Strain
- Negative cash flow is a valid concern, especially if unexpected repairs or vacancies arise. You’ll want to ensure you have an emergency fund specifically for property expenses to avoid financial strain.
The VTI Alternative
- The argument for investing in VTI (Vanguard Total Stock Market ETF) is valid for liquidity, diversification, and passive growth. However:
- Real estate offers leverage, tax advantages (e.g., depreciation, mortgage interest deductions), and the potential for significant appreciation that VTI doesn’t.
- You're also hedging against rent inflation by owning your living space, which is particularly valuable in uncertain housing markets.
- The argument for investing in VTI (Vanguard Total Stock Market ETF) is valid for liquidity, diversification, and passive growth. However:
Are You Headed in the Right Direction?
Short Answer: Yes, with caveats.
- The decision to house hack was a practical move given your age, ability to save on rent, and entry into the real estate market.
- It’s common to feel overwhelmed during your first real estate venture—most beginners second-guess themselves because of the steep learning curve.
Strategies to Optimize Your Current Situation
Increase Rental Income
- Gradually adjust rents to align with market rates, especially as leases renew.
- Offer amenities or upgrades to justify higher rents (e.g., better appliances or shared utilities).
Revisit Financing
- If mortgage rates drop, refinancing could reduce your monthly payments and improve cash flow.
- Look into creative financing for future properties, such as seller financing or house-hacking multi-units instead of single-family homes.
Plan for Long-Term Appreciation
- In a medium cost-of-living area, you're likely to benefit from steady property appreciation over the next decade.
- Avoid selling prematurely unless the financials make it overwhelmingly beneficial.
Diversify Investments
- Once your property is stable, consider putting future savings into diversified investments like VTI.
- This allows you to grow wealth without relying solely on real estate.
Advice from Those Who’ve Been There
Most successful investors started with one property and felt exactly as you do now—doubtful and uncertain. The key is to stick with it, learn from the process, and improve your strategies. You're young enough to recover from mistakes but already making moves that align with long-term wealth-building principles.
If house prices continue to rise faster than rents, your plan to repeat this strategy may slow down, but the equity and experience you gain now position you well for any pivot—whether that's continuing in real estate or diversifying into stocks, REITs, or other assets.
You're doing great—stay the course, keep learning, and adapt as you go.