Hi, I'm very new to real estate investing. I'm a recent college grad in the Rhode Island area and saving on average 2000 a month to hopefully move out of my parents house and to an area near my job to get rid of my long commute. My question is, what advice might some experienced investors have regarding house hacking in a high cost of living area like Portsmouth, RI? Is house hacking In high cost of living areas not recommended?
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
5y
Do you qualify for an FHA loan? This is an amazing tool available to owner-occupants. In any event, coming from the highest cost area in the country, I can think of no better way of getting into real estate than house hacking in a high quality/high growth area. Stretch to make this happen, ensure you have adequate liquidity to survive any bumps you may encounter down the line and you should be happily pleased in the end.
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
5y
@Sam A. it all comes down to the numbers. Are you able to afford living in that area even with the offset/income from renting out the other units?
You would really need to crunch the numbers but my sense would be that if you personally would have difficulty affording an apartment in the area then you’d want to be careful to make sure you could do a house hack affordably.
@Anthony Thompson, yes I should be able to afford living in that area. But I'm thinking the problem might be qualifying for a loan in a high cost of living area especially as a new and very young investor.
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
5y
Do you qualify for an FHA loan? This is an amazing tool available to owner-occupants. In any event, coming from the highest cost area in the country, I can think of no better way of getting into real estate than house hacking in a high quality/high growth area. Stretch to make this happen, ensure you have adequate liquidity to survive any bumps you may encounter down the line and you should be happily pleased in the end.
Real Estate Agent · RI · Member since 2020 · 73 posts · 86 votes
5y
The fact that it’s a high cost of living area won’t matter to the loan officer, all that matters is your income, debt to income ratio, and credit history. Different zip codes will slightly change what you can borrow due to property taxes but it’s not such a huge difference. You can research areas to see where you’d be willing to live, and figure out if there are more house hacking opportunities elsewhere, like in Newport and Middletown. Definitely get with a great mortgage broker/loan officer to see what you can borrow and they can suggest ways to increase your buying power and talk to you about different loans (FHA/conventional/etc) Consider multiple ways to house hack, like buying a single family and renting out your extra rooms or a duplex/triplex to rent the units.
I’ve never house hacked so I’m not sure how they would qualify you for a Owner-occupied multi-family but I always keep my lines of communication open with my mortgage broker so I know all my options while I’m looking at my next investment.
Great first start by saving that amount of money per month. If you’re serious about wanting to house hack, prepare your finances, reach out to a mortgage broker tomorrow and be prepared to have your credit checked so they can give you an accurate number. With house hacking, you still want to buy a place where you can force appreciation (with renovations).