Rent covers half my payment. Is that still a house hack

@kestrel that's the right correction to make. @orchard's $1,250 net covers vacancy and utilities, and a maintenance and capital reserve is a separate line.

A common way beginners handle it is to set aside a percentage of gross rent each month for repairs and a second amount for big-ticket replacement, roof, heating, water heater. On an older single family the total is often somewhere in the 10 to 15 percent range of rent, and on a house you live in you also carry the parts of the building no tenant pays for. Nobody can hand you the correct number, because it depends on the age and condition of the specific house, which is why an inspection and a look at the age of the roof and mechanicals matters more than a rule of thumb.

On the wider question in the thread: the way this strategy is described has changed. The version where rent covered the entire payment depended on low rates and rents rising fast. With prices where they are and rates elevated, most people buying today are reducing a payment rather than erasing it. That is still the main reason the strategy works, because owner-occupant financing lets you buy a property with far less down than an investor could, and the tenant income narrows the payment to something you can carry. Confirm any loan terms in writing with your lender, since programs change.

A payment you can carry is the standard worth measuring against, not a payment of zero.

Before you get to the coverage percentage, read your city's rental ordinance and your zoning code on unrelated occupants. Some places cap the number of unrelated adults in a single family dwelling and some require a license or an inspection to rent rooms at all. Those rules differ by city and state, and I've watched people find out in month four.

If your two-room plan isn't allowed as written, 54% becomes 27% and the whole comparison changes.

54% and you're $580 ahead. I'd take that all day. My thin-margin flips make less than $580 a month of certainty and they take way more of my week.

I've talked myself out of three versions of this exact deal over six months of research, so treat me as a warning. The thing I've decided is that waiting for full coverage in my market means waiting for prices to fall, which is a market call I have no ability to make.

Here's what's wrong with the $580.

You're comparing an owned payment to a rent payment as though the only differences are the numbers. They're not equivalent. Your $2,320 includes principal, which is savings, so the true monthly cost of ownership is lower than $2,320. Call it $1,900 of actual expense in year one on a loan at current rates. Against $1,250 of net rent you're paying $650 of real housing cost versus $1,650 in rent, so the gap is wider than you wrote.

Now the other direction. You've added transaction costs on the way in, closing costs on the way out someday, and a maintenance obligation @kestrel already flagged. Put $250 a month against repairs and capex on a 315k older house and your advantage shrinks back toward $400.

@orchard I'd still do it at 54%, and the number that would stop me is the one where net rent minus reserves stops beating what I'd pay to rent a comparable place. Below that you're paying for the privilege of owning risk.

Whatever coverage you land on, write real leases for the rooms and keep them separate from each other. Room rentals in an owner-occupied house sit in an odd spot legally in a lot of states, sometimes with different eviction procedure than a full-unit tenancy, and that's a question for an attorney licensed where you are. The documents are cheap compared to finding out you have a housemate you can't remove.

@ledger's principal point is the one I keep having to re-learn. I built my whole plan on payment coverage and then realized coverage treats principal as a cost, which it isn't.

I'm planning a first purchase for next spring and I've moved my target from full coverage to "net housing cost under two thirds of what I'd pay in rent." It's a less satisfying number to say out loud and it's the one I can actually find.

@orchard given you already hold land, the thing I'd weigh is whether this house has a second dwelling in it later. Basement with height and a walkout, or a lot with rear access and setbacks that permit a small detached unit. Zoning and permitting for accessory units vary a lot by city and state, so it's a call to the planning department rather than an assumption.

If it does, 54% now with a path to a separate unit in three years is a different asset than 54% forever. If it doesn't, you're buying a house with roommates, which can still be fine.

The part I can't get past is that this is a job. Two roommates in my own kitchen, my own plumber, my own vacancy. I want income that doesn't come with a second job and this isn't it, so I voted for full coverage as my personal line, which I know means I probably never do it.

@marlow I've been sitting where you are for about two years and I've come around a little. The roommate part is a job for the years you live there. The house isn't. After you move out it becomes a normal rental with one lease, and the low down payment you got as an owner-occupant is permanent.

So I've started thinking about the roommate years as the cost of entry rather than the strategy itself. Doesn't make sharing a kitchen pleasant. It does change how I count the $580.

I voted that coverage doesn't decide it. A 54% house in a location with steady tenant demand and a roof with fifteen years left is a better outcome than an 85% house in a place where the second bedroom sits empty four months a year. The coverage number is downstream of the property.

Small portfolio here and the thing that broke at scale for me was reserves, not coverage. I bought two properties on tight math and the third year handed me a furnace and a sewer scope in the same quarter.

@orchard at 54% you're fine on cash flow. What I'd ask is what you have in the bank after closing. If it's under $15k on a $315k older house I'd wait a few months and save rather than change the coverage target.

Curious whether anyone here has run the same house with one roommate instead of two. $700 instead of $1,250 net, so about 30% coverage, and you keep a spare room and a lot more peace. I suspect the second roommate is where most of the friction lives.

@arbor in the rural markets I look at the whole thing inverts. Houses at $130k, room rents at $450 because there's no young shared-housing pool, so coverage looks great and finding the second tenant takes five months. Coverage percentage is meaningless without a read on how deep your tenant pool is.

Four small buildings in and I'll give you the number that actually matters, which is how many months of the payment you can cover with nobody in the property at all. On @orchard's deal that's $2,320 a month out of one salary. If your job covers it without you selling anything, 54% is a good deal. If it doesn't, coverage percentage is the wrong thing to be optimizing.

Every unit I've owned has taught me that the failure isn't a bad month of cash flow. It's a bad month you can't fund.

@cairn that's the framing I'm stealing. I build services around this stuff and the owners who call me in a panic are always the ones whose plan assumed occupancy.

@orchard for what it's worth, the two-room house-hack owners I've worked with mostly report what you're describing, roughly half the payment and a房 that's theirs afterward. Nobody's living free. They also mostly don't regret it.