A house hack that rented three rooms and collected two thirds of plan is worth studying.
Here is a loss worth laying out with its numbers, because every piece of it is avoidable. Take a four bedroom on the edge of a state school town, $340k, 5 percent down on an owner-occupied conventional loan. Payment with taxes and insurance comes to $2,650. The plan is three rooms at $750, so $2,250 of the payment covered and the owner pays $400 to live somewhere they own. Year one ends with an average of $1,540 a month collected, so the owner pays closer to $1,100 a month, which is more than the apartment they left. Where it goes wrong, in order. The first room gets filled with a friend, no written lease, no deposit, month to month by handshake. He leaves in month five owing $1,500 and there is no realistic way to collect it. That room sits empty four months because the search starts in November and nobody moves in November in a college town. Second, the rent is advertised as utilities included and nothing is metered. Utilities run $340 a month across the year, up to $430 in July with the AC going constantly, and that comes straight out of the rent being counted on. Third, the common areas and two of the bedrooms get furnished, $4,200 on a credit card, which never appears in the original math at all. What to do differently: a written lease per room with a deposit held the way the state requires, and confirm those deposit rules before taking a dollar since they vary by state. No friends. Budget each room at nine months paid rather than twelve. Either sub-meter or cap utilities in the lease. An owner who keeps the house usually finds the second year is already better, but a first year like this costs about $8,400 against the original numbers.
