Young couple looking to house hack

47 Replies

House Hacking is a great way to get started. My advice would be to have each one of you purchase a property on your own so that you can take advantage of the first time home buyer (FHA) low money down incentives. Not entirely sure how that works but I am sure you can talk to an investor savvy mortgage lender. What ever you decide to do make sure to have a sound strategy in place so that you don't end up using all of your saving in one deal. The name of the game is to leverage your money into more than one property or at at least good income producing properties.

@Steffany Jensen FHA can be a very good option given the low money down. You can factor MI and high closing cost into your model too and see where the numbers make sense.

I had exact same thoughts after watching podcast about Harris couple. We’ve been in a market for a while and tbh, the cash flow BP said here were a little unrealistic unless we get into an off market deals where a lot of rehabs are being done. Given our level of experiences we can only go with the ones with minor repairs and such only. Our W2 jobs as well as a recent baby don’t allow us to do lots of networking as well as looking for direct deals outselves. But really, the potential of this market is huge. We went to a class where this man Alan Blood had a great analysis of current Utah market and it doesnt seem like its a bubble thats going to burst ( except some area where the price rises substantially comparing with the real demand), so we have big hope :).Best of luck and keep us updated. 

Start going to meeting ups and network. you have a good starting money. Not sure how high the multi family but try and see if you can find any in the surrounding areas if they are too high. Network is key, you'll will find a great agent this way and possibly a good deal. Speak to everyone of your goals as you never know who can help out. I'm glad both partners are on the same page as you don't see that often. Best of luck and hope you find the right home.

We bought a crappy barnasium on outskirts of town for 50 cents per sq foot a few years ago.  About 6000sf. It sat on the market two years because it was so unusual (and ugly). My wife actually found it on Craig’s list.  It had one apartment in it already rented. We converted another two units and are working on the fourth unit. We live in the 5th part. On 5 acres. No city permits to deal with. Taxes are cheaper. Rent is close to what is in town.  A property management company deals with tenants.  We basically live for free. Homestead protection in Texas is the best so it protects it all the equity.  We are converting another partially finished metal building on the same land to a fiveplex so total sf will be about 11,000 sf. Once finished, we can retire from this property alone and don’t have to worry about other opportunities.  It only takes one good deal.  I wish we would have done this earlier. 

@Steffany Jensen this is really exciting to hear. My wife and I are in a very similar financial situation and have just signed a contract for a three unit in Maine. It is a for sale by owner and we are using an FHA 203k to finance our deal. You guys can do it just keep looking and learning.

With your credit score check out the Freddie Mac Home Possible loan if aren't over the income limits. 5% down on 2-4 unit, lower insurance premiums and no upfront payment vs. FHA plus the insurance automatically cancels after 10 years of timely payments, and it's a conventional loan so stronger offer and none of the FHA red tape. House hacking is great! I live in a three unit with the two tenants paying my mortgage and utilities.

Originally posted by @Joe Arida :
@Steffany Jensen contact a realtor and have then send you alerts for new multi-unit listings.

You can also look to get a preapproval letter from a lender. This could be FHA or a portfolio loan. My gf and I house hack a duplex and it's the best thing I could've done.

I got a portfolio loan from a local credit union, 7/1 ARM (adjustable rate mortgage) at 3.375% for 7 years, adjusts after that (max possible interest rate is 8.375%). I put 10% down on purchase price and don't have to pay PMI/MIP.

 Thanks for the tip on getting a pre-approval letter from a lender!

That's awesome you guys didn't have to pay the PMI/MIP either. Is it because you went with the ARM loan rather than doing an FHA?

Originally posted by @Preston Lam :

@Steffany Jensen FHA can be a very good option given the low money down. You can factor MI and high closing cost into your model too and see where the numbers make sense.

I had exact same thoughts after watching podcast about Harris couple. We’ve been in a market for a while and tbh, the cash flow BP said here were a little unrealistic unless we get into an off market deals where a lot of rehabs are being done. Given our level of experiences we can only go with the ones with minor repairs and such only. Our W2 jobs as well as a recent baby don’t allow us to do lots of networking as well as looking for direct deals outselves. But really, the potential of this market is huge. We went to a class where this man Alan Blood had a great analysis of current Utah market and it doesnt seem like its a bubble thats going to burst ( except some area where the price rises substantially comparing with the real demand), so we have big hope :).Best of luck and keep us updated. 

Yeah, we are definitely leaning towards doing an FHA loan just to give us some cushion if any repairs, or other unforeseen expenses pop up.

That's great to hear about the bubble not necessarily being a bubble haha. Can you name some of the specific areas where the prices are extra high right now? My guess is homes in the Avenues, Sugar House, and Sandy areas. Thanks for the response, and good luck to you all as well!

@Steffany Jensen yes thats correct. FHA will require the mortgage premium. The ARM loan is a loan from the banks' own funds (called a portfolio loan). Different banks will have varying requirements as far as down payment. Another local bank could only go down to 15%, another could do 10% but only wanted to do it on a 3/1 or 5/1 term. Shop around, meet with lenders, and see whats available!
Originally posted by @Joseph Clark :
@Steffany Jensen this is really exciting to hear. My wife and I are in a very similar financial situation and have just signed a contract for a three unit in Maine. It is a for sale by owner and we are using an FHA 203k to finance our deal. You guys can do it just keep looking and learning.

I'm interested in hearing what the qualification process for the FHA 203K is like? Did you have to find a contractor beforehand, or are you planning on doing the renovations yourself? Thanks for your response, would love to hear more!

I would definitely get in touch with a few agents and let them know what you're looking for then immediately start the hunt. Be prepared to move fast (pre-approved and know what you're looking for), my two house hacks in DFW offers were made same day I saw them. Also drive around, look for "sale by owner" signs and call! If you see "for lease" signs in front of properties always call and see if they would be interested in selling. The 1% rule is a good rule to stick by especially when starting out (if the property is fully rented make sure it rents for 1% of the purchase price). What an exciting time! My husband and I have been house hacking with FHA loans since 2016 and are looking to do our 3rd one soon, we love it. Congratulations to you both! Enjoy the process!

@Ryan E. Yes the MACU program for first time buyers would apply to them. Did you know MACU came out with a 15% investor loan that you can get the market rate and no mortgage insurance. I'm currently buying a home in Orem with it and the numbers are great even with the higher down payment the cash on cash is only 1% different. The cash flow is awesome to, got the property off the MLS.

@Steffany Jensen you will need to find a general contractor that will be willing to do the work and paperwork involved with the 203k. My understanding is that the bank gets the bids from the contractor and then pays them for the work. I am not sure if you can technically get involved in the work or not. I am still learning as I go.
Originally posted by @Steffany Jensen :
Hi everyone! My husband and I graduated from University in the Spring, we both have full time W-2 jobs, no debt, a 780 credit score, about $25k saved, and live in Salt Lake City, UT. We’d really love to house hack, but are unsure of how to find the best deals or if we even have enough to get started. Any advice for us newbies?

On your first house hack, I recommend you find a neighborhood you want to live in.  Then view your purchase as though you are buying a Single Family home.  That way you dont need to have it rented to make the payment.  Also IF you find out you dont like being landlords, you can leave the unit empty.

I also would worry less about having a great return by Bigger Pockets standards.  Find a place you would like to live, even if the return is a little lower.  On your first rental its more important to learn the process of being a landlord, how you will review tenants, how you will do maintenance, credit checks etc etc.  Sometimes that is a little easier to learn how to be a landlord in a slightly better neighborhood say a B+/A- trendy neighborhood vs a b-/C+ working class neighborhood.  Even if your return is a little lower.

When we got in, we bought a duplex we would like to live in, paid a little over asking but about what we would have paid for a SFH. And ANYTHING we got from our tenants was a bonus. But if it went unleased, it didnt ruin us financially. I suspect that if I went back to my original model of the deal, we barely broke even if we moved out and it turned into a rental. But you know what? as we lived there the rental market went up, and the price went up. And it ended up being a really GREAT deal.

My point is less that every deal turns into a great deal than get used to the mechanics of being a landlord, live there and let the rents move up a2-3%/year, let the mortgage get paid down for a few years, and then it probably becomes a nice solid cash flowing deal.

Originally posted by @Steffany Jensen :

@Cherie Orellana that's what we've been thinking about, but we are worried about the mortgage insurance, closing costs, etc. and are wondering if it's really the best option? We've even looked into a 203k depending on if we decide to buy more of a fixer-upper. Do you know much about those? We're looking mostly in South Salt Lake, North Salt Lake, and anything that's East of I-15 in the Salt Lake Valley. I would love to receive the hotsheets, if you don't mind. We are also keeping our eyes out for basement apartments and mother-in-law.

 Unless you have experience fixing up properties, and/or deep cash reserves, I wouldnt start out with a fixer upper.  TOO much can go wrong.  Usually take twice as long and costs twice as much as you expect.

UPDATE: We put an offer on a house that was accepted on Saturday! We were able to get in at $20k below asking price because they were motivated to move as soon as possible. It’s a single family home with a MIL. The main house and mil have two bedroom, full bath, kitchen, washer and dryer. We’re super excited! We close on November 9th!