Best type of Property to House Hack for first time home buyers - Duplexes?

[Julien J.]

Curious on your opinions.

I've started my journey in the expensive Seattle market and found house hacking a duplex gave me a tremendous boost as my first property.

The top 10 advantages that played out quite well:

1. Built-In Income Stream: Investing in a duplex allowed to generate rental income from day one. By renting out one unit, I covered a significant portion of my mortgage, reducing my monthly housing expenses and easing financial pressure.

2. Cost-Effective Entry: Buying a duplex often requires a lower down payment compared to purchasing a multifamily property (5+). This makes it a more accessible option for first-time buyers with limited funds

3. Equity Building: As you pay down your mortgage using rental income, you're simultaneously building equity in the property. Over time, this can potentially lead to significant wealth accumulation. 

4. Property Management Experience: Living on-site game me a chance to learn about property management firsthand. I develop valuable skills in tenant relations, maintenance, and repairs that can be applied to future investments.

5. Loan Qualification: Rental income from one unit can strengthened myr loan qualification when applying for a mortgage. This enhanced financial profile may lead to better loan terms and lower interest rates.

6. Flexibility for Future Moves: When I decided to move out later, I can continue renting both units, creating a consistent income stream even after transitioning to a new home. When 1 unit was vacant, the other supported the drop in rental income.

7. Tax Benefits: Real estate investment offers various tax advantages. I deducted property-related expenses, such as mortgage interest, property taxes, and maintenance costs, from my taxable income. I have not done a cost segregation yet, but a tempting option.

8. Appreciation Potential: Historically, real estate properties tend to appreciate over time. By owning a duplex, you have the opportunity to benefit from potential property value appreciation, further boosting your investment. In my market the appreciation for that property over 6.5 years averaged out well above 10%.

9. Reduced Living Costs: House hacking allowed me to live in a larger or more desirable property than I could afford at the time solely on my income. By sharing housing costs with tenants, I enjoyed better living conditions at a lower price.

10. Long-Term Wealth Creation: Owning a duplex can be a stepping stone toward a more extensive real estate portfolio. The experience gained and the equity built can set the stage for future investments and a secure financial future. I BRRRR into my next property and the attached HELOC provides me with a great source of flexible capital.

[Michael Smythe]

2-4 unit is probably better than roommate hacking due to separation of "friends" from business.