House Hacking: The Numbers

The concept of house hacking offers several long-term benefits, including the accumulation of equity and potential property value appreciation.

Today we're going to explore three different investment scenarios on a $200,000 property with 5% down and an interest rate of 6.5% (conservative to where rates are at the time of recording) - over a period of 10, 20, and 30 years.

Scenario 1: 10-Year Investment

With a 5% down payment of $10,000, the loan amount would be $190,000 ($200,000 - $10,000).

According to the amortization schedule, the estimated loan balance after 10 years would be approximately $152,158.

Considering an average home appreciation rate of 2% per year, the property value would increase to approximately $244,036. Therefore, your equity at the end of 10 years would be $91,878 ($244,036 - $152,158).

Let's say you house hacked for 5 years and own 5 properties. Based on the numbers above, you could essentially sell each of these properties after their 10 year time frames and collect over $90,000 per year for 5 years. In total, over those 5 years you're looking at just under $460,000 in proceeds. HALF A MILLION.

Scenario 2: 20-Year Investment

Now it's getting fun...

after 20 years, the loan balance would be approximately $78,960 according to the amortization schedule. 

With an average home appreciation rate of 2% per year, the property value would be around $298,000. 

so, your equity at the end of 20 years would be $219,136 ($298,096 - $78,960).

so if you decided to hold these 5 properties for an extra 10 years before selling, after each 20 year time frame, each property would collect just under $220,000 per year for the next 5 years! In total, that's just under $1.1 million!!!

Scenario 3: 30-Year Investment

DRUM ROLL... You're paid off and own the property out-right! 

With an average home appreciation rate of 2% per year, the property value would reach approximately $363,727.

meaning, your equity at the end of 30 years would be $363,727.

This scenario is a little different...

At this point, you can decide based on your own financial situation if you'd like to sell the property and collect the equity gains over the last 30 years

or

since your property no longer has a mortgage payment, your only expenses are the property taxes, home insurance, and maintenance/capital expenditures on the property! so you could enjoy holding this property as long as you want with a much higher cash flow!

But, if you decide to sell these 5, that's over $360,000 per year for the next 5 years... or a grand total of $1,818,635...

Reminder: you bought these places with a $10,000 down payment. $50,000 total for the 5 properties.

You might be thinking, well I didn't include the maintenance or vacancy over the years on each property - the invested amount is probably a lot higher!! 

Well, I also didn't include the annual rent OR the annual increase in rent, nor if there was any cash flow you'll be getting over these time periods, the tax deductions over those years, and also didn't include if you had depreciated these properties! If you're unfamiliar with depreciation, I just made a video on this last week so be sure to go check that out!

Last thing I'll say here..

The beauty of all of this, you don't have to stop after the 5th property... Imagine if you did this for 10 years with 10 properties! I'll end right there and let your imagination run.. :)

Location: 1606 S Duff Ave #100, Ames, IA 50010, USA

Comments

Post a Comment

Popular posts from this blog

House Hacking: Your Property As A Mid-Term Rental

While short-term and long-term rentals, have kind of been the main ways to house hack in recent years, there's a newer method that has emerged probably over the last decade or so, called the mid-term rental.  Today we'll talk about, what mid-term rentals are, how they compare to short and long term rentals, and why you should seriously consider a mid-term rental on your house hacks So what is this so called mid-term rental method It's pretty easy to remember. It's a mix between short-term and long-term rentals, smack dab right in the middle of the two. mid-term rental. This method caters to a specific set of circumstances, though. Unlike short-term rentals, which are typically geared towards travelers staying for days, a weekend or longer than a week or two -  and unlike long-term rentals, which are leases set typically for 12 months or more -  mid-term rentals offer that flexible housing solution in the middle of the two, for people or businesses who require housing an...
Read more

The Advantages of House Hacking: Building Wealth through Real Estate Investing

House hacking is an increasingly popular real estate investment strategy that allows you to live in a property while renting out additional units to generate income. Not only can this approach provide you with a source of rental income, but it can also help you build long-term wealth through real estate investing. Here are five advantages of house hacking that can help you achieve your financial goals. 1. Rental Income One of the biggest advantages of house hacking is the ability to generate rental income from your property. This can help offset the cost of your mortgage and other expenses, making it easier to build equity and achieve long-term financial stability. With the right property and rental strategy, you may even be able to generate enough rental income to cover your entire mortgage payment and other expenses. 2. Tax Benefits House hacking also comes with several tax benefits that can help you save money and build wealth over time. For example, you may be able to deduct expens...
Read more

House Hacking & Depreciation: The Power of Income Deductions

Depreciation is a powerful tool that real estate investors can leverage to maximize their returns and minimize their tax liability. It's an income deduction that allows investors to account for the wear and tear and deterioration of their investment property over time. In this article, we'll explore the benefits of depreciation and how it can positively impact your investment strategy. Depreciation works by allowing investors to deduct a portion of the property's value as an expense each year on their tax returns. The value that can be depreciated is typically the cost of the property (excluding land) divided by the property's useful life (because land is land, it doesn't deteriorate). The specific depreciation method and useful life can vary depending on the property type such as if it's a residential property or a commercial property. So, it's essential to consult with a tax professional for accurate guidance. One significant benefit of depreciation is tha...
Read more