First time home buyer: House Hack or Rent?

Question

Hi,

I'm looking to get started in REI but am teetering back and forth between house hacking and simply renting out a long distance property. Reason being is that I live in an area where home prices are pretty steep so house hacking would probably be the most financially responsible option if I didn't want to relocate and also live in the property. That said, I've been doing some browsing of properties in other states that seem within my budget but given I'm inexperienced, I'm hesitant on that front as well. I guess it comes down to the math and what I am comfortable with but any tips or advice would be greatly appreciated.

Thanks!

Nathan Gesner · Answer

A house hack requires 3.5% down. On a $500,000 fourplex, that will take $17,500.

A $200,000 fourplex in another state will require 20% down or $40,000.

Buying local and expensive is the better option.

Cameron Mayes · Answer

@Andre Galaviz & @Nathan Gesner - Thank you for the responses, those are great points to consider!

Andre Galaviz · Answer

Hey Cameron,

Great that you are considering either as an option. My wife and I are on our first house and we are hacking it to get experience under our belt. We have two kids (13,4) and we still ultimately decided to remodel the lower level and live in it, so we could rent by room upstairs. I thought about long distance investing as well, so figured I could share my thoughts, having had a similar situation to figure out.

I checked out David Greene's Long Distance Investing and BRRRR books and thought it would be better to buy in another state because Denver was so high priced. What we ended up figuring out though, is that without experience dealing with lenders, contractors, renters, and all the in between, we would be at a disadvantage going into another market, even ones where we had friends or family. So, house hacking became the fastest way to get going for us.

Our remodel took four weeks, just finished, and now we are ready to set up the rental space and get it on the market. I would say, if you can manage sharing space with renters, then you are helping people get into a place that may be a little more affordable and at the same time, you could be getting some income from your renters that can help you move forward. Which is where we are right now.

Good luck! Hope this helped.