Should I House-hack to start Real Estate Investing?

7 Replies

Hello BP! I am currently a college student and I live at home in Toledo, Oh to save money from those heavy college expenses. I make decent money for my age (Around $30,000 earned income and $8,000 in school refund checks per year) and I've been wanting to get into real estate since I was 16. Well, I made a goal that I would save $15,000 this year and get started in early 2019 unless a deal came up I couldn't let go. Well, some things have changed. My initial plan was to get an FHA loan and either house-hack or rent it out and continue to live at home but now my girlfriend wants to move together and we agreed on late 2019 but then we moved it up to late 2018! This will throw me off course because now instead of saving for investing I'm finding myself saving to pay someone else to live. Now at home, I help my mom out a lot but I told her I'm going to have to scale back because I have these goals. She's fine with that but now that I have these expenses coming up I'm not sure what to do. I've talked to her and let her know that a smarter investment would be to buy a home rent out the basement or something. Nope, she feels we're not ready for that. I feel like if we lived in an investment property we could do it and handle the expenses with both of our income. Our household income together would be $55,000 per year plus an extra $10,000 in school refund checks because we both were fortunate enough to not have student loans. This is way more than we need to live because this is about $20,000 or more more than we lived off of last year because of promotions and pay raises at work.

My options: 

Buy a house (multi-family hopefully) before this goes down and force her to live with me because I would have this house?

Just rent for six months somewhere and try to find a house once the lease is up?

Push my plans back and wait for the market to crash and then invest?

Not move at all and continue with goals?

Leave the country and everyone in it? (This one is a joke)

I just would like to get some insights from people and what they would do in this situation. Any comments and advice help!

At that age girlfriends come and go, I would not change my financial plans and goals for her.  A fiancé, wife, or baby-mama is a different story.

Goals are very good. However, you can adjust as your situation adjusts. Think about your longer-term goals. From what I've experienced in Toledo, you could pick up a house hack duplex for $30,000 (if you buy right). I'm closing one now at $31k. With and FHA loan as primary you'd need (3.5%) $1,050 down and about $4k in closing costs and fees. You could be into a house hack for $5k. In this scenario, the other unit would likely rent for $400-$500 a month. Total total PITI comes in around $280 per month. You can chalk up the change to maintenance, reserves, and Capex. Still, you could basically live for free and stack from there. The other bonus, the rental income form the other unit counts toward your qualification. If I could rewind my life to your age, I'd do a house hack, no question!

I rarely hear a story that ends well when it starts with "me and my girlfriend/boyfriend bought a (fill in the blank) together." There are happy endings of course (I just rarely hear them).

To revert back to my statement about adjusting goals... If you adjust to the house hack approach, you've accelerated your plan and most importantly you've taken action. Taking the action will change a lot of things.

Maybe the next move is to buy another duplex to house hack a second time, and put Moms in the unit you vacate. Now, you both cover your housing costs from the other unit.

You might even consider shooting for a 4 unit. Acquisition costs a little more, but you probably make money living in a unit.

What are you trying to accomplish through RE? Do these steps align with your ultimate goals?

@Stephon Broughton -

Hi Stephon, yeah I agree with the group here, if you have your girl move in with you- keep the title and financing in your own name. That way you can house-hack and girlfriend-hack depending on both market’s fluctuations! :)

If I was young and really wanted to get something going I’d go for the multi-family flavor as suggested

OR- I’d start myself in one of Toledo’s 3 bedroom 1 bathroom houses in as sketchy an area as I was comfortable in. 43608 has $15k houses all day long that rent for $700/mo. (Watch me have a hundred by 2020, they’re addictive)

If I was you I’d buy a basic house needing some work that I was capable of doing and negotiate a purchase for <$10k and push for seller financing so there was no loan application and no limit to the number you can get. 

Live in that house till it’s time and either buy a second close by and rent it or move into that one and rent your old one. (If I had my way I’d start in one, live in it till I found a great one I wanted to make my home and move into that one - the idea is to keep yourself centric to all the rentals and able to visit them in a 10 minute circle to check on them and poke late rent payers easily)

You do that and you will be independent wealthy in 5-10 years unless you have zero business acumen or people skills. 

I find deals in 43608 for locals all day long, it’s just dangerous for out of state buyers to blindly scoop up. If you have HVAC skills I have a 6 unit that could be bought 1 unit occupied and 5 1200sqft 2 bedroom units needing full rehab. The exterior is brick and the roof doesn’t leak. (Just plan on $50k in work inside if you hired it all out)

Originally posted by @Andrew Fidler :

@Stephon Broughton-

Hi Stephon, yeah I agree with the group here, if you have your girl move in with you- keep the title and financing in your own name. That way you can house-hack and girlfriend-hack depending on both market’s fluctuations! :)

If I was young and really wanted to get something going I’d go for the multi-family flavor as suggested

OR- I’d start myself in one of Toledo’s 3 bedroom 1 bathroom houses in as sketchy an area as I was comfortable in. 43608 has $15k houses all day long that rent for $700/mo. (Watch me have a hundred by 2020, they’re addictive)

If I was you I’d buy a basic house needing some work that I was capable of doing and negotiate a purchase for <$10k and push for seller financing so there was no loan application and no limit to the number you can get. 

Live in that house till it’s time and either buy a second close by and rent it or move into that one and rent your old one. (If I had my way I’d start in one, live in it till I found a great one I wanted to make my home and move into that one - the idea is to keep yourself centric to all the rentals and able to visit them in a 10 minute circle to check on them and poke late rent payers easily)

You do that and you will be independent wealthy in 5-10 years unless you have zero business acumen or people skills. 

I find deals in 43608 for locals all day long, it’s just dangerous for out of state buyers to blindly scoop up. If you have HVAC skills I have a 6 unit that could be bought 1 unit occupied and 5 1200sqft 2 bedroom units needing full rehab. The exterior is brick and the roof doesn’t leak. (Just plan on $50k in work inside if you hired it all out)

Hey Andrew, I thought about going that route just because it's easier finance wise if the home is in decent condition but my issue was having a major expense with them such as plumbing, lead paint, electrical, roofing issues, foundation problems, etc. I'm pretty handy and I can definitely do work with flooring, paint, cabinets, drywall, etc. I would just need an inspection by someone that really knows what they're doing because when my mom purchased her home a few years back it began falling apart (Plumbing issues a major one) and I felt the plumbing issues should've been caught before she purchased because it had to do with the plumbing under the sinks and how they weren't done correctly (thankful for my grandpa because these fixes could've been costly). How would I go about seller financing? Because I know there are many homes that are land bank properties or rei trying to liquidate assets or settle down/sell homes in their portfolio and just get rid of them. I may live in the rental until it's fixed up but I know that I have many options on where to live. My grandparent just paid their house off and they'll probably move in the next few months but I can convince them to sell to me (They'll probably just give it to me) and I can live in that while I fix one up or my dad just paid his house off and I'm welcome there but he wants to put the house in my name so I might take out a HELOC loan on that home (It's in 43608 so won't get too much) to help with costs of the rehab if need be . I'm still working out on how I want to do everything but It'll probably end up just me buying a property in 43608 and staying home to save money (she'll have to deal with it, besides mom doesn't think I'm ready to move out, ha funny her, it'll be a surprise to her when I have a rental) and try to get seller financing and hopefully have the rehab done in a month or two (may have to extend that timeline with my schedule due to lack of time, it's taken me two days to paint one wall and put up a bedroom door, looks great though). I'll keep in contact (I'm the one that came to your house I believe last August and we chatted a bit) and let you know how things are going and maybe before I buy you can walk the property with me for a second opinion and your expertise? Thank you!

Originally posted by @Michael S. :

Goals are very good. However, you can adjust as your situation adjusts. Think about your longer-term goals. From what I've experienced in Toledo, you could pick up a house hack duplex for $30,000 (if you buy right). I'm closing one now at $31k. With and FHA loan as primary you'd need (3.5%) $1,050 down and about $4k in closing costs and fees. You could be into a house hack for $5k. In this scenario, the other unit would likely rent for $400-$500 a month. Total total PITI comes in around $280 per month. You can chalk up the change to maintenance, reserves, and Capex. Still, you could basically live for free and stack from there. The other bonus, the rental income form the other unit counts toward your qualification. If I could rewind my life to your age, I'd do a house hack, no question!

I rarely hear a story that ends well when it starts with "me and my girlfriend/boyfriend bought a (fill in the blank) together." There are happy endings of course (I just rarely hear them).

To revert back to my statement about adjusting goals... If you adjust to the house hack approach, you've accelerated your plan and most importantly you've taken action. Taking the action will change a lot of things.

Maybe the next move is to buy another duplex to house hack a second time, and put Moms in the unit you vacate. Now, you both cover your housing costs from the other unit.

You might even consider shooting for a 4 unit. Acquisition costs a little more, but you probably make money living in a unit.

What are you trying to accomplish through RE? Do these steps align with your ultimate goals?

 Thanks for the response everyone! I understand that girlfriends come and go, I've had my fair share of them but I've known this one for some years, any who I already know I should be putting everything in my own name. @Michael S. I was going to go the FHA route and buy a home ba which would rent for about $750 (Eventually $800 or more if I continue with my planned updates). This will cover her mortgage plus cash flow about $200+ and allow me to really get going from there. My ultimate goal in real estate is to focus on areas in 43612, 43613, 43608, 43606 (the 12 and 13 help me leverage the extra costs of the 08 and 06 neighborhoods and the 08/06 neighborhoods produce a higher cash flow but may have a high vacancy rate due to the type of tenants). Eventually, I may flip a house or two and sell if I feel it's not a long-term investment or I need money to buy another property. I'd also like to mention I may look into the east side of Toledo for properties once Promedica finalizes and build this new development for their employees. This could be a great opportunity if the development works as expected (some development plans don't go as planned and begins to tumble everything positive that was going to happen after it)

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