24 Years old with 30K and ready to House Hack

19 Replies

Just beginning my real estate journey, and as a financial advisor just out of college, my income normally fluctuates. I've been saving religiously, and have 30K to start with. Very fortunate to come out of college with no debt, and practicing what I preach for my clients. Looking to House hack here in Grand Rapids Michigan, but with the market at a high, and my experience lacking in real estate, I haven't made any moves. Looking for input on best practices to make sure I avoid any mistakes from the beginning. Open to any and all suggestions.

@Austin Wingett house hacking is a fantastic way to get started.

Michigan is cheap, so I take it you’re going to be doing a multi family? I would make sure you find something that has value add potential so you can force some immediate equity. Low down payments are great BUT having no equity in a property isn’t. Ideally, if you can find a duplex where one side needs work and one side is turnkey that would be best (live in/fix up the side needing work).

Other than that, I can’t stress enough the importance of screening your tenants thoroughly. It’s not talked about enough but it’s just as important as finding a good deal. If you do the work properly upfront in your screening it will save you enormous amounts of time and money in the future!

-Dan

@Austin Wingett you’re in a great spot! I was also in a similar position as you recently, but I didn’t have quite as much capital on-hand. I actually had to take a small private loan to fund the down payment of my first house hack, but it was WELL worth it. I would suggest reading Craig Curelop’s BP book “The House Hacking Strategy” to fully understand every aspect of house hacking. I’m sure you are aware of this, but house hacking is a balance between quality of life and return on investment. Buying a multi-family will ensure that you at least have your own living quarters, but they also tend to be more expensive that large single-family homes. Also, make sure to find a good lender who will set you up for success on the types of loans you will get since you will likely want to house hack more than one house in the long-term. All of this information is elaborated on in the book I mentioned. I’d be happy to get on a call and tell you about my experience as well!

@Austin Wingett Awesome job saving up! I was able to take advantage of a HUD owned property for my first purchase as there is an initial period of time where only owner occupants can build. Check out this property in Sparta that just got listed. No idea how it's fits your criteria but buying a HUD foreclosure can be a great way to find properties that have a ton of opportunity that owner occupants can get first dibs at.

https://www.hudhomestore.com/Listing/PropertyDetails.aspx?caseNumber=263-524016&sLanguage=ENGLISH&zipCode=&city=&county=&sState=MI&fromPrice=0&toPrice=0&fCaseNumber=&bed=0&bath=0&street=&buyerType=0&specialProgram=&Status=0&indoorAmenities=&outdoorAmenities=&housingType=&stories=&parking=&propertyAge=&OrderbyName=SCASENUMBER&OrderbyValue=ASC&sPageSize=10&pageId=2

Hi Austin - You are a in a great location and financial position. My biggest piece of advice with house hacking is making sure you run the numbers on the property to make sure the property works as a stand-alone rental after you move out of the property. Let me know how else I can help, I have some great local lender recommendations!

@Austin Wingett At your age I would also highly recommend living somewhere with multiple bedrooms and leasing them out to your friends. EX: 2 unit 2 bed/2 bath duplex. On one unit you could rent it out to another family..but the other you can rent out one of the rooms to your friends. This will improve your returns tremendously. One way people value duplexes is based on the NOI. This NOI doesn't factor in the additional rent your getting from renting out the other room to your roomie.

Before you buy make sure you master calculating Cash on Cash return and do not be generous with expenses. Shoot for 12%+

Excited for you man! Go tear it up!



@Austin Wingett

Hey man, I'm also a fellow house hacker in my 20's. I bought a duplex with zero down rather than putting any money into it. Sure, it's in a rougher area than I'd like to be in but it's only for 2 years. See if your state has a zero down FHA program. I know people say always put 20% in, but if I have a duplex, the other person is paying the majority of my mortgage, and now I have more money in my pocket for when I need it, like for a real rental property. Btw, I have zero issues making my mortgage payment even without a tenant. Mortgages are cheap now, put as little down as you can, keep saving and use the cash for a different property. That's my 2 cents

@Austin Wingett - think starting with a duplex in a part of town you want to live in and renting out rooms on the side you're on is a pretty fail-proof strategy.

Not sure what housing at a "high" means, but I'd move forward with something as quickly as you can find it. You're gonna make mistakes, and moving forward means you'll make them quicker and grow faster.

Also look into down payment assistance options from your city, state and county.

Good luck!

Originally posted by @Andrew Slezak :

@Austin Wingett

Hey man, I'm also a fellow house hacker in my 20's. I bought a duplex with zero down rather than putting any money into it. Sure, it's in a rougher area than I'd like to be in but it's only for 2 years. See if your state has a zero down FHA program. I know people say always put 20% in, but if I have a duplex, the other person is paying the majority of my mortgage, and now I have more money in my pocket for when I need it, like for a real rental property. Btw, I have zero issues making my mortgage payment even without a tenant. Mortgages are cheap now, put as little down as you can, keep saving and use the cash for a different property. That's my 2 cents

As an industry professional I think FHA can be a great option but there are also Fannie Mae and Freddie Mac programs that offer 95-100% financing and can also include renovation costs. The PMI on a conventional loan is lower than the MIP on a Gov deal on a 30YR loan. So from a monthly PMI mortgage insurance perspective I would still go with Fannie or Freddie. Keep in mind FHA also has a 1.25% UFMIP which can be hard to swallow. You also have DPA programs that offer DPA plus closing costs that do not have income caps! These loans can also be used for a duplex primary. Just do yourself one big favor and "RATE SHOP" and make sure your being quoted a PAR rate and not paying a buy down for a lower rate. Let me now if you have questions always here to help with this topic.

 

@Austin Wingett , your on the right path. Look into a 203k Loan. Like someone above mentioned find a fixer upper. The nice thing about this loan is that its an FHA product so it apply to any residential property SFR- 4 unit. The 203k Loan is made specifically for properties that will need minor or even major updates. You get your construction costs rolled into he loan and can get in with as little as 3.5% down.

Purchased a duplex in Austin, TX three years ago for $185k out in about $70k into the renovation, the loan after all fees and costs was about $260ish and total out of pocket was like $10k. Obviously you have more equity than this, but if you are able to rehab and then get the property refinanced, you may be able to show you have built up over 20% equity and get out of mortgage insurance. 

@Austin Wingett I wouldn't worry about the market too much, you can't control it. I just bought another househack in Austin, TX and I know with the rent I'm getting, awesome low interest debt and expenses I have that I can hold it indefinitely if the market goes south. I always look at deals as if I need to hold them for at least 10 years, market shifts only really hurt when you have to sell. I have a feeling the gov is going to keep the free money flowing for a while too.

@Austin Wingett I've house hacked twice now in Columbus OH. The good thing about house hacking is how little down you can put on an income producing property. This makes many deals that don't work for non owner occ investors work for you. 

What I personally do is try to find off market deals and give the pitch that I loved the house and want to move into the neighborhood. Which is true! I've found people are more open to a friendly owner occ compared to those cash investors. Best of luck!

Originally posted by @Austin Steed :

@Austin Wingett I've house hacked twice now in Columbus OH. The good thing about house hacking is how little down you can put on an income producing property. This makes many deals that don't work for non owner occ investors work for you. 

What I personally do is try to find off market deals and give the pitch that I loved the house and want to move into the neighborhood. Which is true! I've found people are more open to a friendly owner occ compared to those cash investors. Best of luck!

 I have also house hacked in Columbus, Ohio. We should connect sometime!

@Austin Wingett you are making an awesome decision to house hack here in Grand Rapids. I have helped a few friends and clients do this already, and it is not very difficult to live for free or even cash flow a little while house hacking.

My biggest tip would be to make sure you buy in an area where you would be comfortable holding a property long term. There is nothing worse than buying in a lower class area because the return is a little better and then figuring out that it doesn’t fit with your long term goals.

Dm me if you wanted to get on a quick phone call or meet up for a beer. I would love to help out wherever I can.

Evan DeVisser | Greenridge Realty

Austin, If I can help let me know.  I am a real estate broker, property manager, and investor in GR.  The market is competitive for sure, but I am happy to give advice or direction if you need it.