Would house hacking work with this?

Question

Will it work with lease options as opposed to just renting it out to regular tenants? I am learning of this house hacking thing I am hearing about. House hacking sounds good and all, but how to handle problems like vacancies? If I was to totally depend on tenants paying their rent, I need to be able to deal with vacancies from time to time if that happens. Do I need to a have a property manager to manage the unit or units the other tenants are living in?  I have some cash saved up to put down on a house someday, but it is currently being used for emergencies. Is house hacking not a good idea for someone who is struggling financially with long term debt?

Tony Marcelle · Answer

@Jaysen Medhurst Sounds good. The more units the better for me.

@Timothy Lewman I can't see myself living with roommates. I can already see that getting old before it starts. I am trying to think of who would be perfect tenants to rent the unit to. I  almost thought college kids, but I realize that may be a bad idea.

Jaysen Medhurst · Answer

@Tony Marcelle, if the property is 2-4 unit on 1 deed, you may not be able to "split" them into 2, separately owned properties. So, a lease option, as you described, wouldn't work. This is super specific to the town and property. I wouldn't count on this as a strategy, it's way too narrow. Keep it in mind, but don't count on it.

I would start talking to lenders about pre-qualifying for an FHA loan, which requires very low down payment, allowing you to maintain as much capital as possible. Once you're pre-qualified, you'll know how much you can afford. Then start looking at / analyzing properties. I'd focus on 3- and 4-unit properties. They are much more likely to reduce your monthly expenses in the sort term, as you're house hacking, and be better investments down the line.

Tony Marcelle · Answer

Yes I am referring to multi-family homes. As for the lease option, I was wondering if I could do a rent to own in the other unit rather than just renting on a month to month basis. Considering my current financial situation, do I have a shot at doing the house hacking a multi- family home?

Jaysen Medhurst · Answer

@Tony Marcelle, I assume your referring to buying a multi-unit property, living in one unit, and renting out the rest. "House hacking" can mean a few different things.

Please explain what you mean as far as lease options.

Vacancies should be figured into your financial analysis. 8% of rent is a good rule of thumb. When one tenant moves out, you get another one to take their place. There is plenty of advice on BP about how to do his well.

You don't need to hire a management company to handle the other units. You could, but sounds like you're looking to keep costs down. Either way, figure management into your analysis so you know that it can be supported, should you ever decide to move out and not want to self-manage.

House hacking can be a great way to reduce living expenses, while building a equity in a long-term investment.