Hello everyone! I was hoping I could run through my situation, and see if I could get some advice from the community.
I am turning 25 in October, and my lease ends in June. I work near Glenwood South (downtown). I have a pretty stable engineering job, and would love to either use my savings to purchase my first single family rental. Or, I would like to "house hack" a single or multi-family home.
I went to NC State, and feel I have a decent eye for what people are willing to rent for in Raleigh, however I can't find many deals in Raleigh that follow the 1% rule and 50% rule. I understand in high areas, this rule may not always be applicable. But I was wondering if I should stick to this rule, or if getting a deal like this in Raleigh is too ambitious? I know there are many other ways to find deals, but it looks like everything on the MLS in Raleigh is lower than 1%.
I feel like the willingness to house hack my first home would be an advantage, however I feel like the Raleigh market may be too expensive for me. If someone was in my shoes, and had approx 40k to invest, the willingness to house hack, and wanted to live within 30min of downtown. Would you invest locally, look for another market to invest, or continue to save before starting your empire?
Thanks for any input!
Welcome @Nathan Birkedal !
I too went to NCSU (grad school) and house hacked while I was in school. It can still be done but it definitely depends on your personal tastes and how ok you are with living frugally. I lived in a couple of my college rentals while building my portfolio. It worked for me as I was single at the time, but now it wouldn't work. I'm glad I did it when I did, though.
You can still find some great properties to house hack, even if it's just a single family home (or townhome/condo) and you're renting extra rooms out.
Most things in the MLS in the Triangle are not going to meet 1%. With that said, if I were in your shoes I'd be buying an affordable 3 bed townhome, living in one bedroom, and renting out the other 2. That would significantly reduce your housing costs, allowing you to save more for your next rental, rinse, repeat :)
@Nathan Birkedal Make sure to talk to a lender first to figure out what you can afford so you know what properties to look at.
You mentioned you have about 40k to invest in real estate. There is not a much. Depending on how long it took you to save them, the property prices might be rising faster then you can save so waiting and more time and saving might not always work the best.
Here is the deal, if you do an investment property, 40k will give you about 175k purchase price. (40k - 5k closing cost and other fees to play it safe = 35k downpayment, 20% down)
That should narrow your search a bit. If you are going for SFH, you can find a decent rental properties for that price.
If you want to get a property that needs work, you will likely need more cash to do the repairs / upgrades so keep that in mind too. 175k means move in ready with no repairs, unless you are able to save more every months and put that into repairs. But for an investment property, its is very hard to do improvements when tenants lives there so you will likely need that cash when you purchase the property so you would need a significantly lower priced properties than this.
There are so many other options and its hard to advice with a limited knowledge of your situation and your goals, etc. If you do house hack, make sure you know what you are doing. There is nothing worse then having homeowners doing their own remodels that is not up to code or bad craftsmanship. Might cost you more down the road (horrible trend from watching HGTV in my opinion)
Since you don't own property yet, i would maybe look into putting 5% down with a conventional loan, live in for 2 years, then turn it into rental.. You will get 95% LTV and very good interest locked for 30 years.
Personally for me, i would want at least break even after all expenses. 1% is really tough right now for a property in a nice neighborhood. If you get something that needs work, you might be able to build some equity right-away and do BRRRR.
Even if you get 0.7%, keep in mind that as long as the market keeps going up and inflation stays high, you will likely be able to charge higher rent every year so eventually you cashflow will grow large. (also some expenses too and you can't never assume the market will always go up).
@Nathan Birkedal While I am not in the Raleigh area I have a similar situation. I am turning 24 and 8 months into my Financial Analyst career. I purchased a house hack duplex 4 months ago in Greenville, NC.
Best decision I've made post graduation.
@Caleb Heimsoth thanks for the shout out :)
I've been working with a few people for the past 18 months and the idea of a house hack "" in a reasonable area inside the beltline or even in Apex or Cary is laughable to me.
ex: a 1.5 million dollar duplex near Cameron Village that supposedly rents for 2500 each side, 400k duplexes in Apex that rent for 1150 each side, etc.
As much as I'd love to have the lower capital requirement with a house hack I am focusing on other markets outside of the Triangle and outside of North Carolina.
Let me know if you ever want to meet up with Caleb or I. We love talking real estate and are also pretty new to things!
You may have to go a little further outside of the Triangle to get something more affordable. We are currently investing in SFH just North or Raleigh/outside of the Triangle and getting the 1% so it can be done. While I would say the 1% is not a hard and fast rule as a go/no go gauge to invest, you should look at projected cash flow and ensure you don't lose money. In a house hack situation that should be to at least drastically cut your living expenses (rent/mortgage).
Also, you are probably in a position to be eligible for a FHA loan and could put just 3% down on a property. I love the idea of the house hack whether it is a SFH or a multi up to 4-plex. This is a great way to start!
I would stay here and in invest as your first property. I think for the first one you want to have more control, be able to be more hands on and build your systems. Even though the area is expensive there are good cash flowing properties to be had, sometimes you have to be creative, but the area still has a lot of upside in my opinion.