Can you House-Hack a Multi-Family?

Question

We had one of our investors back out of a Multi-Family Building (6 Units) we are trying to purchase,,, Is there a commercial loan that would allow us to rent our Primary and move into one of the apartments as a primary residence and house hack? Or because its 6 and not 4 is this not possible?

Jason Wray · Answer

Anything above 4 Units is commercial and does not fall under the primary owner occupancy guide lines.  You can always buy it as a investment and tap into any equity you have for the down payment from another home.  Unless you have a friend or another investor who wants to split the down payment you can have more than one person on the loan to qualify and split assets.

Shanea Fulks · Answer

@Ken P.

I was suggesting only because with a conventional loan, we can rent our primary, so the payment isnt in our DTI.

We actually would cash flow $3,000 a month if we rented. I know with a sfr we could live in the unit, house hack and get a 3% down payment. But being that it is a commercial property, I dont know if there is such a thing.

Yes, once we have the property fully furnished, it WILL have substantial cash flow.

Shanea Fulks · Answer

@Brandon Vukelich

The Private Money Lender said this investor has been reading articles that a crash is coming. She said he sounded like he had a "Doomsday" attitude.

He also kept asking what would happen if my husband and I "Died"????

We have a multi-million dollar life insurance, a very strong Will with 2 executors and we have all assets set up to be paid off in the event of our death. Even worst case scenario, selling our portfolio as is pays everything off and  brings in $300,000 profit.

Ken P. · Answer

Shanea, there is no relationship between your primary residence and any loan on that and a commercial loan for the 6-unit apartment building.  You can rent your primary house out and live elsewhere at any time, as long as local regulations allow (e.g., some HOAs do not allow rentals in the community).  Hopefully you would only do that if it makes financial sense to do so, such as having rental income high enough to produce positive cash flow after accounting for all expenses.

On the commercial loan side, for the 6-unit building, most lenders are going to want to see a business plan that makes sense with the building fully rented, of course with some projection of lost rent.  If you plan to occupy one of the units (house hack), then either the rent from the remaining 5 units should be high enough to still make a positive business case, or you will need to pay rent to make the numbers work.  If you're entering into this transaction with business partners and a commercial lender, the deal has to guarantee the lender and your investors that they will be paid back and receive a return on their investment, respectively, with house hacking a nice-to-have if the deal can support it.

Brandon Vukelich · Answer

Curious, why did they back out?  Were they financing the deal or just bringing your down payment + closing costs?  Depending on the terms, if you still need an investor, shoot me a DM.

Can you House-Hack a Multi-Family?

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