House Hack a REI...prior to purchasing "Forever Home"?

2 Replies

Hello fellow BPers!   If I may, let me give you the "lay of the land" before posing my question.

My wife and I currently are looking to sell our primary residence, a small SF 2/1 in the spring.  We also own another SF 2/1 that we've rented out for the last 7 years and it's a solid cash flow property. We definitely want to expand our portfolio in the future, but are in need of more space due to kids.  We need more space ASAP...but would like to "hack" the opportunity for a few reasons.  So.... 

We've been contemplating making our next move as purchasing a multi-family (duplex, fourplex) and moving in for a year. The primary reason being that we'd do an FHA loan and also that it would alleviate the need to sell the following year when we look to purchase our "forever" home. Our rationale is:

1. Save a bit of $ of the next year with tenant(s) helping to pay mortgage.  Build up a bit more for our down payment on our primary residence.

2. "House Hack" to pick up another property for our portfolio

3. When looking for our "forever" home, we can look w/o have the pressure of having to unload a home.

Any thoughts?  Has anyone done this?   Will picking up the extra rental property and residing in it negatively impact our ability for the next mortgage?   (*I'm waiting on a call back from our mortgage broker)

I would love to execute the strategy but don't want it to hinder the possibility so us qualifying.  Appreciate any insights!    Thanks BP. 

@Todd Kalsey Since you already clearly have the landlord experience (7+ years mentioned) reporting on your tax returns from renting small 2/1 property, you should be able to count the income from the new property with no problem. Obviously, you would only take into account the other unit (s) being rented, so if the mortgage amount is high enough that could cause your DTI to shift. Just run the numbers on the property to make sure that one unit can cover debt. I would use 75% of total rents, and subtract out expenses to give you a safe estimate and allow for total peace of mind when the time comes to get the new "forever home" mortgage.

@Josh Mitchell that's what I was thinking in much more vague terms.  I appreciate your perspective and info!!!  I think I can find something that'll work in my area.  Hopefully I can get a "win-win" with this idea.  Thanks a ton for the feedback Josh!

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