House Hacking: Is it stupid to put a large downpayment?

3 Replies

Hello All, 

I currently own 5 rentals, but i am having difficulties getting financing on another "investment" property after speaking to multiple banks, they seem ok with giving me a loan for primary residence, because i can use VA benefits, but most are just refusing to give me another loan for investing..

So i have been contemplating doing house hacking and purchasing another property that is larger, so i can have extra space to rent a room or 2 out to try out house hacking to further my investing in real estate. I have enough to put about 50-60% down on a larger house, but i feel like it goes against everything i have learned about in real estate investing.. but my alternate thought is the money i have is just sitting making very little interest, so why not put it to work and reduce the amount i would have to pay every month, possibly making a single roommate cover the entire cost for me to live there or net a little in cash flow and try to pay it off in an accelerated manner. 

Also another situation i may do is place it in an LLC, up till now all my properties are in my name and not in an LLC, these were bought prior to me furthering my education on real estate investing, so thinking i could start the ball rolling placing this one in an LLC and in a year or so possibly moving out of it and turning it into a rental and have it properly in an LLC.

Hi @William Huston , I think you have a few options.

To start off, I recommend that you immediately start working to put your properties in LLCs. Speak to a lawyer that specializes in asset protection for the strategy that is best suited for your situation. You have a tremendous about of risk by holding them all in your name. IMO, sorting this out should be your first priority.

Regarding further financing, focus your energy on local/regional banks and credit unions. Be very upfront about your current situation and future plans, so they understand what you're looking to do. There may be options to consolidate all of your properties under 1 loan, for example. 

Assuming you're not over leveraged and your properties are in good financial shape, you should be able to find a banker that's very happy to work with you.

Alternatively, look into trading up your current properties. Selling off what you have and consolidating into 1 larger multi-family. You'll not only end up holding only 1 loan, but you'll start to realize the economies of scale that come with larger properties.

@William Huston I doubt u can get a owner occupied loan where you put your primary residence in an LLC. Virtually all lenders will require title under your personal name. LLCs are overhyped especially if you have lIttle equity to protect. If you need asset protection look into an umbrella insurance first. It’s most likely cheaper and less of a headache to maintain. Don’t forget your state may require you to pay transfer tax if you place your property in an LLC as well.