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

153 Replies

Originally posted by @Lamar Jean :

After house hacking for a year, how do one get a second property to house hack?

 @Lamar Jean some lenders will now let you use your rent income towards your debit to incom ratio towards your next purchase.

Originally posted by @Chad Mitchell :

Hi, I'm looking to invest in my first multifamily. It's an older home that's split into 5 apartments. Would I still be able to secure residential financing (HFA, 203k, or standard mortgage) with 5 units as opposed to 4 or less?

Also, any advice on where to start looking for financing? I'm leaning towards a 203k, so that I can I include the rehab expenses. Currently, one unit is rented, but the other 4 units are vacant (owner didn't renew leases for those 4 with intent to sell). My goal is to rehab the other four units prior to renting them out, so I can increase rent and do a potential refinance in a year or two.

If you have equity in your current property you could use a HELOC to fund the down payment of the new property and possibly even the renovation. Good Luck!

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! 

Are in a market that appreciates? Have you increased rents? If so I would start asking about a new valuation based on your current NOI.

@Charlie Granados I'm not sure what options are available to you in Long Island, but for my first house hack we bought a duplex (lived in one side and rented out the other). For our second house hack we purchased a fourplex. I have a client who bought a single family home for his first house hack and rented out the additional rooms in the house. There are quite a few ways to pull it off depending on what you're looking for. :) 

EDIT: Just realized your comment was posted quite a few days back, haha. Hopefully you still see this and find it helpful! 

I have a rental home right now that is being used as collateral on a HELOC. It is currently generating 1700$ a month with PITI @ 1200$ a month.

I am living with my parents as that home is generating cash flow. I am thinking of buying a town home or a multiplex, but don't know if I would be able to take out a FHA loan on that property. If not is there another way of creative financing to get another property if I live in it?

If I am able to get a FHA loan, would I be able to move out in a year or two and rent out my unit even its still under the FHA loan and I am not living there anymore?

Just not trying to put up a bunch of cash for another investment home as the properties near me in the twin cities area are pretty expensive.

Hi Everyone, 

I am looking to buy a home to house hack in my small town on the shoreline in CT. I have to stay in my town for the kid's schools and it's slim pickings. I've found a property that would be perfect but it was an overpriced short sale for 2 years and the family signed it over to the bank and walked away. It's not on the market now but I know it's in the foreclosure process. Flippers circle like vultures in my town and I want to try to get it before it hits the market since they pay cash and will more attractive than me. 

My question is, how do I get an offer to the bank before they put it back on the market? I'm a real estate agent if that helps but don't know how the process works.

Thanks!

@Jack Zheng if you do an FHA loan you should be able to move out after a "seasoning period" which is typically a year and still keep the structure of the loan. I would make sure to double check with any lender about what their seasoning period is if they have one. If you are upfront with your goals lenders will want to work with you. However, if you move out before the period where you are required to be there, it is loan fraud. So make sure you are communicating with your lender to know what is required of you. One thing to keep in mind with an FHA is you can only have one FHA loan.

@Minh Nguyen House-Hacking is a great opportunity for living for free and potentially cash flowing on top of it. There are programs out there for 3%, 3.5%, or 5% down payments if you can't afford the 20-25% DP. 

As you many not be as leveraged as you want to be, you can look at the other end of the spectrum; your cash-on-cash return. Little cash down and actually having reserves in your bank for any miscellaneous mishaps or repairs isn't always a negative thing.  

Keep in mind, when you go to sell a multi-family, you're most liking going to sell it back to an investor. Where as the condo, you might be able to sell for a higher price and potentially sell faster. 

Another thing to take in consideration, multi-families have the opportunity of bringing in revenue if one or multiple units are vacant, where as if a single family or condo is vacant you produce no revenue until a tenant is in place and under contract. 

Best of Luck!

Hi all,

My first post here on BiggerPockets, thought I would get some advice on a potential property me and the fiance are looking to invest in and what to look out for? Appreciate any thoughts! Some quick facts:

- We live in Manhattan and looking to buy our first property (Currently pay about 2.5k a month rent, but it's time to leave and make the next jump)

- Looking at a property in Union City NJ (About 650k) 

- Monthly payment all in (Mortgage/Taxes,etc.) look to be around 4.2k (5% Down, HomePossible Loan) 

- 3 Family property in great condition (2 x 3bed1ba Units will be rented around $1700, while we plan to live in the basement unit). 

That leaves around $800 a month, but adding in utilities, vacancy, maintenance rates, etc. That can probably go as high as $1500 a month which is still far less than we pay today. I know there are probably better house hacking deals if we looked further out in Newark, Rutherford etc. but the other half needs to be closer to the city with her work.

1 big downside, there is currently an oil tank that provides the heat/hot water to the entire building, I'm trying to see if the seller is willing to remove prior to closing (I'm aware of the environmental disaster issue).

1) Assuming we need to stay this close to the city, does this look like a good first time deal? My thinking is, after 1 year we could move out and look to get another property in a similar location 

2) Oil tank issue? Any other smart ways of trying to handle the situation? 

Appreciate advice/thoughts.

Thanks!

Ravi

@Aathavan Raviraj If they dont agree to remove the tank you can ask them to escrow a certain amount in case there is a leak which will cost more than the price for a standard removal. You can also have soil samples taken before removal to ensure that there is no leak and many companies will give you a firm price for removal and remediation after thats done. the last thing you want is an expensive environmental issue so make sure you know the status of the tank before you close. Also make sure you get an NFA (no further action) letter from the state if they do remove it and remediation is necessary. 

@Craig Curelop I am house-hacking a Triplex in Salt Lake City, UT. We have refinanced to a Conventional and are now looking for another property in the North-East SLC area. We were planning on using the rents from the current Tri and the standard 75% of rents from the units (not including the one we'd occupy) of the new Multi. The problem is with the new 2019 guideline change, we now cannot use the rents we'll gain from the property we're currently in. That cuts our buying power down by about $2200/mo. which is quite a bit. 
Question: What alternative loan options do we have that have a similar, 3.5% down loan product we can use on Tri and Fourplexes? Any any help is appreciated. 

Hi all,

How are units defined when assessing a multifamily? I'm trying to acquire a multifamily property with two duplexes (4 units) and a house (1 unit). Would this be considered commercial? Is there any way to have this categorized as residential if I will be living in the house or one of the duplexes?

In general, I am finding quite a few opportunities for small commercial (5 units), but not many with 2-4 units. Is this because commercial properties are more difficult to finance so more remain available, or is this just an illusory correlation based on limited experience?

Thanks @Ray Reed ,I talked this through with my broker and he suggested 2 options, 

A) We offer over asking and ask the seller to install this prior to closing

B) We offer under asking and install this ourselves after the fact 

My preference is for A as it rolls the costs into the Mortgage and hassle is with the seller. Let me know if you've seen this scenario play out different ways?

@David Healey Hey how's it going?! Love what you & your family are up to! Way to be a great example as an agent! I want to make sure I understand your dilemma & sorry if it's obvious! 

To check context: You want to purchase a Multi-family property and were planning on qualifying using 75% of the total Rental Income from the Triplex. However, the lender won't let you use the "future income" from the 3rd unit of the Triplex (that you're currently occupying).

  • If I understand the situation correctly, could you "move in with family " for example or get a signed 12-month rental agreement on your current unit that would make it possible to count the income from all 3 units? 
  • Also, I've never been in this situation, but if you're leaving a Triplex & purchasing a Duplex (for example) that you'll occupy half of, can you count 75% of the Rental Income from all 4 of the 5 units that will be paying rent OR can you only count the income on the previous property (Triplex only)? 

I hope my random questions make sense & I apologize if I've missed the point! :P Long day!  Feel free to message me or reach out with details & I can ask around! I'm curious on how to navigate this situation & hope to have this problem in the future! :)

Where there's a will there's a way! You'll figure it out!! Best of luck!

-Danielle Hildebrand

Thanks for reaching out. Love that you’re a great contributor on BP and an SLC Agent yourself. My wife and I LOVE BP. It’s been a game changer for us that has helped us get into position to break the mold and help us achieve our goals. 

Great Questions. Long story longer: Yes, we can use 75% of the remaining units (not including the one we will be occupying) "established rents" in the new Duplex, Triplex or Fourplex. And Yes, we are unable to use the rents from the unit we currently live in, to qualify for the purchase of the next property on an FHA loan because the FHA guidelines just changed. They used to say that we could use rents in the unit we are leaving if we lived 100 miles away from the next Multi we were to buy OR we had 25% equity in the current Multi. Now that OR changed to an AND. We have 25% equity, but we don't live 100 miles from the new one we want to buy.

So, we lost $2200/mo. worth of buying power from that guideline change and it’s harder now to be able to qualify for another Multi-Family. 

All that to give some context for my question. It's harder to qualify for a Multi in a safe neighborhood, for a reasonable price with how strong the Sellers Market is these days. Question: What FHA alternative loan options are out there, specifically in our Greater Salt Lake area?

Any advise/help on this would be awesome. Also, we should put together a BP chapter or Think Tank bounce ideas off each other.

@David Healey

Why is it 2200/month that you are losing? Would you be renting the unit you are leaving for that much? Your situation wouldn't apply to me for a while, because I'm just getting started in real estate, but my husband and I are also planning on house hacking a small multifamily property, and I'm trying to learn more about FHA loans since that is what we would likely be using.

I've never posted on a forum before. Man, this took a lot of courage.

@McKenna Garcia Congrats on your first post. If you can find the courage to ask a lot of questions, BiggerPockets will be your very best resource for valuable content at no cost to you. 

Fannie Mae is who insures FHA loans in case the borrower defaults on the loan, meaning the Federal Housing Administration (FHA) will cover the loss of the loan lessening the risk for the lender. As the old idiom goes, "He who pays the piper calls the tune." I.e. The FHA backs the loan and pays on the loss if the borrower defaults, so the FHA gets to make the rules (Guidelines). These are what your lender will have to use to make sure each borrower falls within in order to "Qualify" them for the loan.

The FHA changed existing guidelines in January of 2019. The old guideline under, "Rental Income on Retained Primary Residence," it changed from saying: "Rental income may be counted when relocating outside or reasonable commute distance for job OR borrower has 25% equity" but changed to: "Rental income may be counted when relocating and new residence is located at least 100 miles from previous residence AND If no history of rental income since the last tax filing, borrower must have 25% equity."

So, the $2,200/mo. we'd be getting in rents for the unit we are leaving would not be considered in the equation as rents received when qualifying for the new property. We will still get the rents and they will be cash-flow, but it cuts our buying power down fairly substantially. 

We (and you) will still have many ways to boost your buying ability by maintaining a good debt to income (DTI) ratio and structuring your taxes each year to pay more to the Federal Government and the State, but you'll be able to show you earn more and can therefore qualify for more.

Hope this answers your questions. Happy posting and good luck in your future REI's.

Please check my thinking process on hacking my home and let me know if my numbers seem right. Previously I've been looking for rental property and almost closed on a single family unit, but the seller wouldn't negotiate. Anyway, where I am now is looking at hacking my current house into a rental and just getting a fixer to live in for a couple of years.

Current house-3 Bd/2 Ba , single garage, fenced yard, great location

Current house value - 150,000

Owed-99,000

Payment w/ taxes, insurance- 950/month

Potential rent accord. to PM- 1400/month

Cash Flow-350/month after fees or manage myself for full amount

So the cash flow should be better actually than almost everything I've looked at so far. 

Houses I'm considering as a fixer. Something 160,000-190,000 that could potentially be sold for 200,000-220,000, so could flip and profit 15,000-30,000.....or could repeat process and  potentially rent for 1800/month.

Hi all

I am brand new in real estate investment, I already read my first book :) 

I need some clarification on house hacking:

I have been told that once you are own your primary residence you can't buy a 2nd property with the intention of making that a primary residence, UNLESS you are selling you actual home. 

Does anyone have any experience in this?  Is that true?

Also when you are buying your first property with owner-occupancy, you must actually move in there, correct? So basically you can't house-hack, only if you physically move in.

Thanks,

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