House Hacking vs Out of State vs Passive Investing vs Waiting??

Question

Hello BP experts, I'm a first time home buyer. I was looking into house hacking opportunities in my local market (Boise, ID), but it seems a bit pricey. Apologies in advance for the long post!

Some poking around in Zillow/Redfin shows the cheapest duplexes/triplexes seem to be around 500k-700k, with similar single units renting for about 1000-1600$. Cheaper single families (3b2b/4b2b) seem to be between 350k to 450k roughly, and individual rooms in similar places seem to rent for about 600-800$. My job is fairly hectic, so I wouldn't have time to manage tenants and would have to get a property manager. I would have about 50-60k to spare for all initial costs including down payment, repairs etc. I have reserves, but would prefer not to put all of that in right away and hold some money for unexpected expenses.

For context, my current monthly housing expenses are ~1250$ including rent, utilities, internet etc in a decent area with a short daily commute. I would be spending much more every month if I house hack, even if I rent out other units/rooms. Does it make sense to be house hacking if your monthly expenses become 2-3x what they are now? The opportunity cost (i.e. investing the initial costs + the savings from renting each month, into an index fund) seems to be substantial even with the tax advantages of owning a home.

Unless the math is way off, with current interest rates, home prices would have to appreciate by about 5.5% or higher for the next 5-10 years to make it worthwhile to own a home here. From Zillow's home price index, I see this market has had lower growth than this since 2023 Jan (<4%), though to be fair, it overheated during COVID. I don't know what long term estimates for price growth are here now (or how I would estimate it accurately).

Would it be less risky to just invest out of state in other markets where I can get neutral or slightly positive cashflow? I was considering Columbus, Indianapolis, Huntsville, maybe Minneapolis, though I only just started looking into this. (Maybe something like rent to retirement/"turnkey")?

I've also seen advice about reaching out to local flippers to try and learn more by putting a small amount of money into their deals. But I'm not sure how I would go about doing that (or creating an agreement like that), or even vetting people for it?

OR am I thinking about this wrong and are there other instruments or assets I should be looking at to get exposure to real estate more passively? I am not an accredited investor.

Apologies again for the lengthy post, but any advice or recommendations are welcome! What would you do in this situation if you were starting out??

If I should post in a different forum, or more information is needed, let me know.

Michael Smythe · Answer

@Marty Shawn

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

Why is Property Class so important for investors to understand and apply in their investing strategies?

Because the Property Class dictates the Class of the tenant pool that the property will attract.

The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

Both Property Class and Tenant Class affect what type of contractors, handymen and property management companies will work on a property.

If you buy & renovate a property in Class D area to Class A standards, what Tenant Class will rent it?

Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

So, if you fail to apply the correct assumptions to a property, your expectations won’t be met and it may even be a financial disaster.

We use the following to rank Property Classes, in order of importance:

• Property Tenant Pool: closely linked to location, but not always.
• Property Location: closely linked to tenant pool, but not always.
• Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

Key metrics for each Property Class:

Class A Properties: Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years. Tenant Default: 0-5% probability of eviction or early lease termination. Section 8: Class A rents are too high and won’t be approved. Vacancies: 5-10%, depending on market conditions. Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

Class B Properties: Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years. Tenant Default: 5-10% probability of eviction or early lease termination. Vacancies: 10-15%, depending on market conditions. Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation. Section 8: Class B rents are usually too high for the Section 8 program.

Class C Properties: Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability. Tenant Default: 10-20% probability of eviction or early lease termination. Section 8: Class C rents usually meet program requirements, proper screening still recommended. Vacancies: 10-20%, depending on market conditions and tenant screening. Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation. Class D Properties: Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”. Tenant Default: 20-30% probability of eviction or early lease termination.

Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection. Vacancies: 20%+, depending on market conditions and tenant screening. Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

Where did we get our FICO credit score information from?

Check out this chart:

FICO Score

Pct of Population

Default Probability

800 or more

13.00%

1.00%

750-799

27.00%

1.00%

700-749

18.00%

4.40%

650-699

15.00%

8.90%

600-649

12.00%

15.80%

550-599

8.00%

22.50%

500-549

5.00%

28.40%

Less than 499

2.00%

41.00%

Source: Fair Isaac Company

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

The City of Detroit has 183 Neighborhoods we’ve analyzed and ranked on a map on our website.

DM us if you’d like to discuss this logical approach in greater detail!

Evan Hopple · Answer

@Marty ShawnAs great as the house hack strategy is, it doesn't always make sense in higher-priced markets like yours. Many people in the same situation turn to the Midwest for deals with better rent-to-price ratios. The biggest hurdle to investing out of state is building your team to buy and manage the property, a good local investment agent would help connect you with the right people.

Becca F. · Answer

@Marty Shawn

If you're still on here, I don't know anything about the Boise market except that a significant number of Californians moved there during COVID with remote work.

I agree with Nicholas L and Peter W.'s comments.

If house hacking works with your lifestyle and financial situation, I would favor that. Could you invest within a 2 hour drive, some were not as expensive as Boise? And still continue to pay your $1250 rent if HH doesn't work?

As far as OOS investing, it depends on where you're looking and what property you're buying. If it's in a nice suburb with great schools (Class A to B+), you may be able to reduce your risks with tenant issues, repairs. I've talked to dozens of California investors who have lost money with inexpensive markets with "cash flow on paper" properties (Class C). Many of these are older homes with deferred maintenance or badly done renovation. I'm -$300 to -$500 a month on a "it's close to 1% cash flow" home in Indianapolis most months out of 2 years from constant repairs. My Class A Indy home which I bought over 10 years ago is doing better.

Be careful of "turnkey" companies - they can range from great to terrible and ask many questions about who did the renovation and tenant screening (if they place tenants). I would fly out to the areas you're considering and do multiple visits, and talk to local investors (unbiased parties) - if you just look a numbers on a spreadsheet or whoever is telling you their numbers, verify this info.

As far as passive investing, meaning syndications, I would do a LOT of research on these (do a search on this on BP and see how many people have lost money). As a LP (Limited Partner), you have little control. This is not a beginner strategy. You usually need to be an accredited investor. I talked to 3 syndications...huge pass for me. I asked myself if I'd be ok with losing $100,000 if the syndication went south or if they need to do capital call (ask investors for more money). I'd rather own my own property and have more direct control.

Btw, I'm not an agent, wholesaler, syndicator, lender etc and have nothing to sell you. Good luck.

Peter W. · Answer

I know nothing about Boise, but usually cheapest isn't best. I randomly pulled a dublex on zillow:

4306-4308 Collister Ave, Boise, ID 83703 | MLS #98937859 | Zillow

and the numbers seem to work at 20% down (given the current tenant pays 3k/mo--I don't know how believable the rent is, as market rent, like you said, is closer to 2k and the other tenant pays 1875). But you could do something like this and get two roommates at 700 a piece and it gets close to making sense with 20% down. At market rent for the first tenant, you'd be getting 3400 in rent vs. 4200 in PITI payments, so you would still be reducing your housing costs (although only a little)

The reality as others have said, is that at current prices, rents and interest rate, buying to rent does not make a lot of sense in most markets--the returns are not there for the effort involved. Part of investing is to go where you can make money. Another part is predicting the future better than others. In my home market, there is a real shortage of houses, and I'm buying at 50-60% of the price to build new--which means there will be little additional supply--which leads to above average rent and appreciation.

Nicholas L. · Answer

@Marty Shawn

your post is really thoughtful and your analysis is spot-on. the market is just difficult right now. i don't have any silver bullets for you. so here are my answers.

Should you house hack? Yes, if you can. Only you can determine if it makes financial sense for you and fits your lifestyle and commute. And only you can determine how much you're willing to spend each month. But I would keep looking. If others give up after just a few weeks or a few showings, then don't be like them - keep looking until you find something that fits. Maybe it takes a year. So what?

Would it be less risky to just invest out of state in other markets where I can get neutral or slightly positive cashflow?

No, it would not be less risky. Many new investors get entranced by supposedly lower prices in the markets you mentioned, buy a property, turn it over to people they've never met, and immediately start losing money. There is basically no cash flow in long term rentals anywhere right now. Sure, your spreadsheet might show you making $102 a month on some random property after all expenses. But... what about paying back all your closing costs and leasing costs and rent ready costs? And what happens when you have a rough turnover 2 years in, and have a few thousand dollars of repairs? There goes 10 years of cash flow. Spending every dollar you have on a random property before you have a primary residence does not make sense. Here's my required reading on OOS:

https://www.biggerpockets.com/forums/963/topics/1195280-expe...

https://www.biggerpockets.com/forums/48/topics/1160450-run-i...

https://www.biggerpockets.com/forums/48/topics/1137397-balti...

https://www.biggerpockets.com/forums/52/topics/1010977-12-00...

I've also seen advice about reaching out to local flippers to try and learn more by putting a small amount of money into their deals. But I'm not sure how I would go about doing that (or creating an agreement like that), or even vetting people for it?

This is not a beginner strategy. Almost no established investors / flippers want to borrow a small amount of money from a brand new investor. It makes no sense and is highly risky for both parties.

OR am I thinking about this wrong and are there other instruments or assets I should be looking at to get exposure to real estate more passively?

Can't advise you on this - all I know about you is what you posted. But again, your analysis that nothing stands out right now is, unfortunately, accurate.

Hope this helps

Not trying to be discouraging, just realistic

Roland S. · Answer

@Marty Shawn Hey, great breakdown of your situation—Boise's market does seem pricey for house hacking, especially with those duplex/triplex prices and your budget of $50-60K for down payment and costs. Your math on monthly expenses (2-3x current rent) and opportunity cost is spot-on, and it's smart to consider home price growth trends (under 4% since 2023 per Zillow). For out-of-state options like Columbus, Indianapolis, or Huntsville, turnkey or rent-to-retirement properties could offer better cash flow, but you'd need to factor in property management costs (typically 8-12% of rent) and travel for oversight. Local flippers can be a good network to tap—start by attending REI meetups in Boise or joining online groups to vet and connect with them, but draft clear agreements with legal help.

If you want passive real estate exposure as a non-accredited investor, REITs or crowdfunding platforms (like Fundrise) for smaller investments might be worth exploring, though returns can vary. Curious about Boise’s long-term growth potential. Good luck sir!

Joe Hammel · Answer

If you’re looking to invest OOS, Metro Detroit has what 99% of Real Estate Investors want. Couple hundred bucks a door monthly cash flow, solid ROI, and yes plenty appreciation. (#1 appreciating city 2023)

I personally make well over $100k/yr cash flow from 21 properties here. All of which, I’ve purchased within the last 4 years.

There are 2 types of people who dog on Detroit..

1. People who don't actually own property in Detroit

2. People who did it wrong and weren't able to execute.

If you do it right, it’s arguably the best market to invest.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: .9%-1.4% rule deals

Coc ROI: 4-12%

Total ROI: 20-40%

Cash flow: $50-$250/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-10%+ (has been double digit for a decade)

Location: C+, B-

These numbers are based on the “sweet spot” in Metro Detroit. These are largely in the suburbs and some markets within the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, and mortgage industry National footprints. Ford, Rocket mortgage, Beaumont hospitals and more. All complimented with Amazon fulfillment centers, google, and more tech manufacturing jobs.

The bad reputation of “Detroit” comes from OOS investors wanting sub $40,000, D class properties in poor condition, because they pencil out to 2-3% deals on paper. We don’t buy those.

We have found what works and repeat it as much as funds allow.

Detroit has one the highest rent to price ratios in the country…and we focus on the best balance of price/location within the area.

Here is a picture of my portfolio if you/anyone is curious.

Robert Ellis · Answer

can you post some example deals in hilltop and linden on how they cashflow at existing prices and rents? I'd love to see a columbus realtor defend their opinions on why a $700 apartment in the hood of columbus cash flows and is a good investment.

Taz Zettergren · Answer

@Marty Shawn

You’ve clearly put a lot of thought into this, and you’re asking all the right questions! There’s no one-size-fits-all approach, but a few things to consider:

House hacking can be a great strategy if it makes financial sense and aligns with your lifestyle. If your housing costs would double or triple compared to renting, it might not be the best move right now—especially with limited cash flow potential in Boise. But if you’re set on staying local, it’s worth keeping an eye out for the right deal rather than rushing into something.

Out-of-state investing is one of the best ways to find strong cash-flowing properties while keeping things passive. The key is working with the right company—one that owns the entire process, from acquisition and renovation to long-term management. When everything is handled under one roof, it eliminates a lot of the common headaches of remote investing and allows you to truly be hands-off while still building wealth. The markets you’re considering have strong fundamentals, and many investors successfully scale this way without having to be actively involved.

If managing a property doesn’t fit your schedule right now, keeping your capital liquid for the right opportunity isn’t a bad idea. You could also explore more passive routes.

At the end of the day, the best move is the one that fits your goals, financial situation, and risk tolerance. No need to force a deal just to get in the game—this market requires patience. What’s your top priority? Appreciation, cash flow, or just getting your first property under your belt?

Would love to hear what direction you’re leaning!

Ryan Harrell · Answer

Hi @Marty Shawn

Welcome to BP! Many of the investors I work with have been in similar situations. Investing out-of-state in lower-cost markets can be lucrative, but thorough research is key to choosing the right areas and neighborhoods. If you're interested, I'd be happy to discuss turnkey as an option. Best of luck!

House Hacking vs Out of State vs Passive Investing vs Waiting??

House Hacking vs Out of State vs Passive Investing vs Waiting??

Most Popular Reply

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FICO Score	Pct of Population	Default Probability
800 or more	13.00%	1.00%
750-799	27.00%	1.00%
700-749	18.00%	4.40%
650-699	15.00%	8.90%
600-649	12.00%	15.80%
550-599	8.00%	22.50%
500-549	5.00%	28.40%
Less than 499	2.00%	41.00%