Transitioning from house hacking a small multi-family

4 Replies

Hello,

First of all, I am new here; thank you all for being part of this community.

I have recently started my journey in real estate. I am committed to buying a small multifamily property (duplex or triplex) in/around St. Petersburg, Florida. I am going to house hack (live in one unit of the property while renting out the other one or two units).

My question is this: how do I transition from house hacking a duplex/triplex to having a real house of my own and also expanding my RE portfolio? I obviously want to have a house (but would be fine living in another small multi-family for a while) but also want to keep buying other rental properties. Is there a good way to achieve this? I have read multiple articles and watched many videos about house hacking, but none say what to do AFTER your house hack. 
Thank you,
Eric

@Eric Sipe

Hey!

I think there are different approaches to this as one method may not be suitable or appealing to everyone. But, one way, would be -

(1) Use a FHA loan to buy a property to house hack with only 3.5 percent down, put tenants in one unit and you live in the other unit for a year (this is one of the rules you have to abide by).

(2) Then, after a year, refinance out of the FHA loan into a conventional loan.

(3) Then, buy another multifamily property with a FHA loan where you can househack.

(4) Move into new property, put tenants in your previous unit, and repeat.

Hope this helps!

Victor

@Victor So

I forgot about FHA loans! I'll have to read more about them. I know that I am eligible for a VA loan (I think about I can get one every 3 to 5 years or so), so I can supplement on "off years" with the FHA loans to get new properties.

Thanks for the clarification!

Eric

@ Eric Sipe

Hey Eric, I'm a realtor in St. Pete and Victor is spot on. A big reason that you don't want to stay in an FHA loan is that you will pay PMI (Private Mortgage Insurance) for the life of the loan. With a conventional loan you only pay PMI until you have 20% equity in the property.

The down side is that refinancing costs thousands of dollars in fees that you can never recover. Another solution is to start out with a hard money lender or private money lender for that one year. Yes there are also costs associated with that type of financing too. I suggest you compare the two and see what would save you the most money in your situation.

Always feel free to reach out for more details or clarification!  Congratulations on taking your first steps towards financial freedom!

Originally posted by @Adam Benmbark :

@ Eric Sipe

Hey Eric, I'm a realtor in St. Pete and Victor is spot on. A big reason that you don't want to stay in an FHA loan is that you will pay PMI (Private Mortgage Insurance) for the life of the loan. With a conventional loan you only pay PMI until you have 20% equity in the property.

The down side is that refinancing costs thousands of dollars in fees that you can never recover.  Another solution is to start out with a hard money lender or private money lender for that one year.   Yes there are also costs associated with that type of financing too.  I suggest you compare the two and see what would save you the most money in your situation.

Always feel free to reach out for more details or clarification!  Congratulations on taking your first steps towards financial freedom!

Hard $ would be far to expensive for what he is trying to accomplish here. stick with the VA loan, and then refi out of it, you can only have one VA/FHA loan out at a time. House hacking takes time, several years because the equity has to catch up with the LTV, but it's a great way to acquire properties over time. which ultimately is the goal!