House Hacking Research #2- Ask/Answer any House Hacking Question!

110 Replies

@Silas Rogers If you haven't already, I'd highly recommend reading the house hacking article on BP, that's what I referenced when I first learned about house hacking.

 https://www.biggerpockets.com/blog/2013/11/02/hack...

For my market I wasn't looking too hard for small multifamily because they are pretty scarce and are often in C/D class neighborhoods which I didn't want to live in. Honestly I did not buy my first house with the intent of house hacking, I mostly just really needed a place to live at the time. That being said I specifically looked for either houses/townhouses that were 3B2B or 2B2B (with the ability to easily add a 3rd bedroom on) and I wanted a max purchase price that was ~75% of the largest loan I actually qualified for. 

I found my current place on MLS through my realtor after touring a bunch of house and honestly I got really lucky. The numbers ended up working out great for me even though I hadn't specifically been using the 50% rule or anything. Looking back (and towards the future as I am analyzing my next deal specifically for a house hack) the biggest factors I'd consider are:

1. Average rent in the area you're looking to house hack in -- don't high ball or low ball what you'll actually be making on rent. A friend of mine high balled the amount she'd be getting per month and ended up getting rid of the rental property rather than having negative cash flow every month.

2. What amount of rehab you want to put into the property since you'll most likely be living there while you're upgrading. I went for light rehab because due to lack of funds I knew I'd be doing a lot of the rehab myself.

3. Max purchase price and if the property fits into the 50% rule when you have roommates. See the above article for details on the 50% rule.

4. What type of property makes sense in your area and what are you going to be happy with. As I mentioned before I didn't really consider small multifamily BUT I already have friends lined up to live with me so I wasn't concerned about sharing my actual house with a stranger, I don't think I'd be comfortable renting out a room to 2 random people.

Originally posted by @James Faillettaz :

HI Craig & Others, 

I am currently owner occupying a triplex that I bought with an FHA 3.5% loan at the end of September 2018. I'm trying to move into another multi-family property and keep the triplex I'm living in now as a rental property. I have talked with a few bankers, and they said that I would not be able to get another FHA loan and that a conventional mortgage on a multi-family property would start at 15% down for a duplex and go up from there for every additional unit up to four. I was wondering if there is a way to move into the next property with a smaller down payment ideal under or around 5%.

Thank you! 

Hi James,

Borrowers are generally limited to having only one FHA loan at a time. If you have to move more than 100 miles away for job change or some other extenuating circumstance, you can get another FHA loan, maybe. But generally, limit one per customer, period.

On the Fannie/Freddie side, 5% loans are only available for SFRs. 2-4 units require an investor loan, even if owner occ one unit, so down payment minimum is 15%.

The only way to do another low/no down 2-4 unit in your area would be to use a VA loan if you're eligible.

If you can only do 5% down, buy an SFR.

My first property was a duplex, zero down, VA. Second was another VA, but SFR. Third was 5% conventional, fourth is 10% conventional. All owner occupied. I'm "saving" my one and only FHA loan spot for the perfect 4-plex.

Has anyone invested in Mexico? Right now I live in Puerto Vallarta, MX.

Cirque du soleil Theme Park is being built in Nuevo vallarta so it is driving the price of condos up.

One building I invested in sold out in one month. it kind of crazy the way these properties are going.

The deal I'm looking at is for crowd funding or an individual to invest in.

Individual:

buy a condo with 30% down.

Get 8% off the sale price

sale the condo for 20% more than sale price

(the math)

condo is $495,000, we buy @ $455.400 (8% off)

take control of condo with 30% down @ $136,620

leaving amount owed @ $318,780

we sale condo @ $545,000

Profit = $91,080

not bad for 2 months of work.

Crowd Funding:

buy building with 12 condos

30% down

8% off of sale price because we are buying pre construction

sale each condo for 20% more

(the Math)

condos are $455.400 each $5,464,800

30% down at $1,639,440

sale at $6,557,760

Profit= $1,092,960

please let me know what you think

regards,

Ricky

@Lisa Irimata

Thanks for the detailed response! I will definitely read that blog. I’m Excited to get started. Best of luck to you on your next house hack!

I've talked to a couple of people who are opposed to FHA due to PMI it carries with it. Is there any way to combat this, or does it just come with the territory? I myself am looking at house hacking in my market but am trying to weigh out the best options.

My husband and I are in SE Florida and are thinking about selling our SFH to purchase a duplex in a very safe intercoastal community. Currently we make 180,000 pre tax as a couple. Our current residence is on schedule to be pain off in 10 years (20 years ahead of our 30 year conventional loan). We spend 38% ($3700 a month, excluding our $325/month HOA fee) of our take home pay on housing alone in order to pay off our house faster. If we move to the duplex and live in one side we would have housing expenses of $2900 and could conservatively rent out the other half for $2000 leaving us a balance of $900. We really love our privacy which is why we are considering a duplex lifestyle over renting out rooms in our house. In the long term (10 years) we could still pay off this duplex but have a much larger cash savings to buy more real estate, and we could also move out and rent both sides. If the place is paid off it would cash flow about $2500-3000. Anyone have thoughts on the decision? We are 30 years old, newbies to landlording/RE investing, but more than ever see the long term benefits of working towards greater financial freedom.

@Andrew Wright I write a twelve month lease. By the time folks are leasing apartments, they're usually settled in town and want to be there during the summer. Works pretty well.

My husband and I are in SE Florida and are thinking about selling our SFH to purchase a duplex in a very safe intercoastal community. Currently we make 180,000 pre tax as a couple. Our current residence is on schedule to be pain off in 10 years (20 years ahead of our 30 year conventional loan). We spend 38% ($3700 a month, excluding our $325/month HOA fee) of our take home pay on housing alone in order to pay off our house faster. If we move to the duplex and live in one side we would have housing expenses of $2900 and could conservatively rent out the other half for $2000 leaving us a balance of $900. We really love our privacy which is why we are considering a duplex lifestyle over renting out rooms in our house. In the long term (10 years) we could still pay off this duplex but have a much larger cash savings to buy more real estate, and we could also move out and rent both sides. If the place is paid off it would cash flow about $2500-3000. Anyone have thoughts on the decision? We are 30 years old, newbies to landlording/RE investing, but more than ever see the long term benefits of working towards greater financial freedom.

@James Faillettaz Find a different banker. I did just what you'd talking about, and was able to get 5% down through my credit union.

@Lamar Jean I'm not sure of other options as I funded my first property with a conventional mortgage. Do you have a lender you could talk to about your options? I've heard that it's pretty difficult to get approved for multiple FHA loans. If I stumble across something I'll definitely be sure to let you know!

@Jassen Bowman

Thank you,  for the information! 

@Michael Belenos

I was able to find a different banker that let me use the MHFA, Step Up loan. This Loan allows me to put 5% down on any MFH with 2-4 units. 

@Lamar Jean It might vary with different lenders, but in my case, as long as I live there for a year, I don't need to pay 20% down, only the conventional 5%. So after a year, if I bring my signed leases for the next year to my lender, showing that both units will be under contract for the year, he will wipe away 70% of the debt from that mortgage from my debt to income ratio. Enabling me to go buy another one, and do it again, with only 5% down, making my ROI through the roof.

Hi everyone, I am looking to house hack and want to buy with an FHA loan but the house I can afford is a wreck!!! Needs siding, roof and all new windows. Is it possible to get a hard money loan for 2 months to get the work done and then refi into an FHA loan?

@Doug Phillips I'm with you on the PMI. Waste of money! If the house is outdated or ugly, buy w/ the FHA and then fix it up and have it re-appraised to show 20% equity in the home so you can drop the PMI. Comp ARV before buying to make sure you can increase value to re-appraise. Also remember, FHA won't allow peeling paint, leaky roof, broken windows etc. so you'll have to get a good deal or a house that's been maintained but hasn't been updated.

That's a good point, and may consider going that route actually, thank you @Kim Handelman !

@Craig Curelop Any tips to house hacking in Clearwater.Fl, looking for something on or close to beach. Would love to find something to rehab.

@Craig Curelop

I've read your blog posts and j believe you started off with an estimated 800% COC return or something. Then you realized that the sleeping arrangements weren't the best (noisy and you didn't like just having a curtain) so you moved to your own room.

I could've confused you with someone else, so if so, I apologise.

How are things now? Any update?

@Charlie Granados why are you doing a commercial loan? You're pay higher interest and do you really want your first ever property to be 5+ units? More power to you if you can handle it just be cautious. Make sure you have MORE than enough reserves

@Andrew Wright year long contracts are typical for college rentals. Solely to not leave the landlord empty handed in the summer.

@Mike Roy does 1.5 usually work out for a 4 Plex? Even the 1% rule cash flows, but doesn't get 10%+ COC

@Chris Connolly - Generally, but you still have to run the numbers.  High taxes, utilities, vacancy, repairs or cost of capital can make 1.5% insufficient.  

Originally posted by @Jassen Bowman :
Originally posted by @James Faillettaz:

HI Craig & Others, 

I am currently owner occupying a triplex that I bought with an FHA 3.5% loan at the end of September 2018. I'm trying to move into another multi-family property and keep the triplex I'm living in now as a rental property. I have talked with a few bankers, and they said that I would not be able to get another FHA loan and that a conventional mortgage on a multi-family property would start at 15% down for a duplex and go up from there for every additional unit up to four. I was wondering if there is a way to move into the next property with a smaller down payment ideal under or around 5%.

Thank you! 

Hi James,

Borrowers are generally limited to having only one FHA loan at a time. If you have to move more than 100 miles away for job change or some other extenuating circumstance, you can get another FHA loan, maybe. But generally, limit one per customer, period.

On the Fannie/Freddie side, 5% loans are only available for SFRs. 2-4 units require an investor loan, even if owner occ one unit, so down payment minimum is 15%.

The only way to do another low/no down 2-4 unit in your area would be to use a VA loan if you're eligible.

If you can only do 5% down, buy an SFR.

My first property was a duplex, zero down, VA. Second was another VA, but SFR. Third was 5% conventional, fourth is 10% conventional. All owner occupied. I'm "saving" my one and only FHA loan spot for the perfect 4-plex.

 @jassenbowman your first loan does not have to be a fha 

You can do it later on

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