House hacking in an expensive market like Miami, Fl.

[Evelyn Castillo]

Hello BP! I am located in Homestead, Florida. This is about a 30-40 min drive from Miami. I am set on the idea of house hacking but I understand that house hacking has a better chance of being profitable in lower priced markets. I’ve been looking at multi family homes on realtor.com and have noticed that they are indeed very pricey. Does anyone have any tips? Has anyone done house hacking in the Miami market? I feel the doubts creeping in but I refuse to let that happen. Thank you in advance. 

[Perry Livingston]

@Evelyn Castillo it's all about perseverance, mind-set and patience! If not something today, you'll find it tomorrow. If you can't find it on the MLS, get creative :-). Look for rental listings that have been sitting for a long time, walk around your neighborhood and look for the one house "no one likes to look at" and knock on the door. Found a house in pre-forclosure? maybe you can be the one to swoop in and help someone out of a bad situation while also getting a great deal. If you're not opposed to a rent by the room scenario, SFH might cost less for a lower barrier to entry.

There's money to be had in every market, you just have to keep digging until you find it. Math is everything here. Analyze as many deals as you can like the ones above and you will find something; the BP calculators have helped me a ton there. Also, before I forget BP just published a book on this! Definitely check it out if you haven't already

[Raymond J. Rodrigues]

@Evelyn Castillo hey? I

[James Carlson]

@Evelyn Castillo

First off, good for you for taking some steps into the real estate game. Whether house hacking in a high-cost area depends on how you define "profitable." So, two things on that:

1. The way I look at it, and how I counsel my buyers on house hacking here in Denver, is that you have to live somewhere. Renting is a fool's errand all around. So next step is to buy, so you're building equity. If you're going to buy, then doing a house hack is way more cost-efficient than not doing it, right? 
2. Most people are just talking about cash-flow. I get that, but if you can find a home in which you live for a much-reduced monthly payment and you get the appreciation that comes with a high-cost, highly desirable area like Denver (or in your case, Miami), then that's a good game. Denver's averaged 6% home price increases annually for the last 45 years. (That's including the down years of the late 80s and the 07/08 crash.) 

Buy something, rent out the rooms, pay a low monthly payment (or none at all depending on how well you house hack), and watch your home go up in value over the next 10 years. 

[Jeffrey Chan]

It all depends on the deal but house hacking is doable in the city of Miami. I purchased from a wholesaler a SFH for $170,000. It was illegally subdivided into a 2 bed 1 bath apt and a 1 bed 1 bath very small apt in the back. If I left this property alone and decided to live in smaller back apartment, the $1,400 would have easily covered all the bills.

Because it's my personal home, I am over-renovating it. Let's say I spend another $80,000. My all-in cost is $250,000. The ARV is $300,000. Getting a 75% LTV loan, that's $225,000 with a principal and interest payment of $1,064. I live in one of the bedrooms and rent out the other two for $700 each. That just about covers the mortgage payment, insurance, and property tax, and I have $25,000 into the property .

That's how I could have house hacked my home if I wanted to.  

[Evelyn Castillo]

Originally posted by @James Carlson:

@Evelyn Castillo

First off, good for you for taking some steps into the real estate game. Whether house hacking in a high-cost area depends on how you define "profitable." So, two things on that:

1. The way I look at it, and how I counsel my buyers on house hacking here in Denver, is that you have to live somewhere. Renting is a fool's errand all around. So next step is to buy, so you're building equity. If you're going to buy, then doing a house hack is way more cost-efficient than not doing it, right? 
2. Most people are just talking about cash-flow. I get that, but if you can find a home in which you live for a much-reduced monthly payment and you get the appreciation that comes with a high-cost, highly desirable area like Denver (or in your case, Miami), then that's a good game. Denver's averaged 6% home price increases annually for the last 45 years. (That's including the down years of the late 80s and the 07/08 crash.) 

Buy something, rent out the rooms, pay a low monthly payment (or none at all depending on how well you house hack), and watch your home go up in value over the next 10 years. 

I never thought of it in that light, you make a good point. I needed this mind shift! Thank you for the clear response. Do you happen to know of any investor friendly agents in the Miami, Fl or Homestead, Fl area? I have been in contact with 2 so far but it seems like they don’t understand my vision.

[Evelyn Castillo]

Originally posted by @Jeffrey Chan:

It all depends on the deal but house hacking is doable in the city of Miami. I purchased from a wholesaler a SFH for $170,000. It was illegally subdivided into a 2 bed 1 bath apt and a 1 bed 1 bath very small apt in the back. If I left this property alone and decided to live in smaller back apartment, the $1,400 would have easily covered all the bills.

Because it's my personal home, I am over-renovating it. Let's say I spend another $80,000. My all-in cost is $250,000. The ARV is $300,000. Getting a 75% LTV loan, that's $225,000 with a principal and interest payment of $1,064. I live in one of the bedrooms and rent out the other two for $700 each. That just about covers the mortgage payment, insurance, and property tax, and I have $25,000 into the property .

That's how I could have house hacked my home if I wanted to.  

 Hey Jeffrey, thanks for the thorough response! It is greatly appreciated. Also, I never extended my search for a property through a wholesaler so I might start looking into that. 

[Alejandro Valdes]

@Evelyn Castillo

Hello Evelyn, it’s not easy since our market is very competitive but it’s very possible so don’t give up

I recently purchased a fourplex in the Fort Lauderdale area for 620k with an FHA loan, 3.5% down, 3.25% rate and I made 3% realtor commission so it cost me very little. I'm living in one of the units and renting out the other three. My mortgage, water and sewage bill and lawn care are getting paid from the rental income and I'm still making a few hundred dollars in passive income. After one year I will move out and I will make from $1800 to $2000 a month after all expenses are paid and do it again!

It took me almost a year of looking and submitting offers to get this deal but it was worth it.

[Evelyn Castillo]

@Alejandro Valdes, that's awesome. Yes, it is competitive so it's encouraging to see someone winning in the same market. I will definitely stay persistent. Thanks! 

[Jeffrey Chan]

When I first got to Miami and started looking at multifamily properties with 2-4 units in Florida, I discovered that very generally speaking, the higher up you go to 3 to 4 units, the fewer there are.  There are however a lot of illegal subdivisions, "bonus efficiencies," illegal buildings on lots zoned for single family, it's all crazy out there.  Make sure you check your property against the Miami-Dade property appraiser's website (google Miami property search and click on the Property Search Landing Page).  Enter the address of the subject property and see what it's zoned for.  The most absurd thing I came across was a single family zoned lot with 5 separate structures on it with 6 families living on the property. 

Listed on MLS at any one time, half the triplexes and quadplexes could be "fake" the last time I checked - do your own due diligence.

I'm not saying this to discourage you but be prepared to be very patient like @Alejandro Valdes, and get ready to sort through a lot of junk.  It's an unfortunate reality that generally speaking, in Miami-Dade and Broward counties, there never was mass production of tri and quadplexes and thus, inventory is generally low.  

[Evelyn Castillo]

@Jeffrey Chan, thanks for the heads up! You are definitely not the first to warn me on this. I’ll definitely do my due diligence. That being said, I’ve also considered the single family home and rent niche since they are more abundant in this market. This is not to say that I won’t look out for multi family homes but I will definitely keep my options open. 

[Alejandro Valdes]

@Jeffrey Chan

I agree with Jeffrey 100%!

Patience is key. I looked on Realtor.com and Zillow every single day and submitted more than 10 offers before I got one accepted.

Also, along with my offer I submitted my DU and proof of funds that proved that I could even buy the property with 25% down if needed but I chose FHA because I would have left very little money into the deal and keep my savings for the next one

I guess owner liked that accepted my full price offer even though there were multiple offers

It’s a legal fourplex and fully remodeled and fully rented. I even had to wait almost two months to move in because that’s when one of the leases expired

The only inconvenience is that I have to live there for 1 year and I made the mistake of letting the tenants know that I was the owner (HUGE MISTAKE). But time goes by fast so soon I’ll be able to move out and start looking for another fourplex and do it all over again

Not sure or there’s a limit to how many fourplexes one can buy as owner occupied but I’ll intend to do as many as I’m allowed to

Btw, does anyone know if there’s a limit as to how many house hacks one can do?