House Hacking As An 18-year-old?

Question

So I just turned 18 (about a month ago)  and I want to move out and I've been looking at ways to support my own housing etc. I have a couple part time jobs and I've been working and saving my money up. I live in Southern California and the market is relatively on the higher side. Im looking into getting an FHA loan (signed or co-signed) from my father and I just wanted a second opinion. I already have a group of friends that are willing to move out and pay rent for a year and I've ran my numbers and everything and the monthly mortgage would cost anywhere from 2.8k-3.5k a month and I would have to split that amongst 4-5 people. My plan is to have them pay for the majority of the mortgage since they are living in a house that I would purchase.

So for instance, lets say the mortgage is $3400 flat and that split amongst 5 people would be $680 but I was thinking about raising the price per person to $750. 750x4(roommates excluding me)=$3000 leading me to only pay 400$ month compared to paying the full $3400 by myself. What do you guys think? Is this unethical to do? Is this a logical plan? I'm honestly really overwhelmed and lost. Any sort of response would be really helpful. Thank you.

Daniel Oh · Answer

Thank you! I want to make sure that I have the freedom to raise my kids and spend time with my family in the future. Thank you for the idea of searching for outer areas as well. I was in the process of looking at mortgage prices around the area too and theyre pretty much the same unfortunately.

Daniel Oh · Answer

Yeah I'm currently looking into wholesaling some properties near me to just build that initial capital (sorry should've included that in with the initial post) but I was just thinking for the future.

Bonnie Low · Answer

First, HUGE respect for thinking like an investor at such a young age! As a mom of 3 boys, I love to see young people tackling their future with energy and vision. House hacking is always a great way to start. It might be tough in your environment just because rents are so high, so maybe look in a community just outside of where you currently are to try to find something a little more affordable. You just want to make sure you can cover your mortgage, and young people are being particularly hard hit by COVID unemployment so you want to make sure your roomies can continue paying their rent.

Andy Pembleton · Answer

@Daniel Oh

I'm in the same situation as you brother,

My suggestion (If you're really serious about investing), would be to look into wholesaling or house flipping to start building up some capital and rapport first before tackling rentals. What I've found with the concept of flipping; you'll gain some insight to how all the functions of a house work and then when it comes time to be a landlord, then you know more of what you're getting aside from tenant screening.

Have you listened to any of the BP podcasts? Regardless, I highly recommend episode 371

Daniel Oh · Answer

Monthly income is about 1.5-2k and not sitting on much captial. I was also thinking about getting some down payment assistance as well.

Griffin Parriott · Answer

Whats your monthly income, and how much cash are you sitting on?

Daniel Oh · Answer

Yes this helps tons! Thanks for the insight. I just feel like I could be doing more if I were in the outside world? I also want to start a youtube channel and stuff like that but I can't be doing that kind of stuff at home because of the environment. The mortgage prices/house prices are pretty high for a 4 bed 2 bath kind of home.

Andy Pembleton · Answer

I wouldn't say that's entirely unethical, but if you could find someplace on the lower end of your mortgage scale then it would be more ideal. Rent should ideally be a little more expensive than how you have it set because you'll have to take into account CapEx, taxes, utilities, and all the other fun stuff that comes with ownership. If this were an idea solely just for a new living environment, I'd look for a cheaper deal in where your roommates will pay off everything.

You're in the right mindset though, I can relate to what you're trying to do. However you also have to consider what you're going to do when your tenants move out at the end of their one year lease, and how long it may take for you to find new tenants that are suitable to your standards.

Like you, I wanted to move out and have a space for me and a couple friends to stay as well, but I realized that everyone has their own paths and intentions in life. At our age, I think it may be best to stay at home for a couple more years to build up capital first.

Hopefully that helps!