House hack or buy and hold?

[Darrel Hernandez]

I am at a bit of a crossroad. As of the beginning of 2020 my wife and I have decided to take our financial freedom into our own hands. We have paid off all consumer debt (roughly $20k), started budgeting and saving. As of today we have roughly $20k saved.

Our original plan was to save enough money to purchase a multi-family investment property 2-4 units in a developing area in the south side of Chicago. We were thinking that would be in the $20-$30K range.

We currently own a 2 bedroom condo that house me my wife & our 14 year old son. My wife & I have been thinking about adding to our family and when that time comes we will have no room for a second child. That puts us at a crossroad as to which direction to take. Do we stay cramped in our two bedroom condo and stick to the original plan? Do we modify the plan and try house hacking? My thought is that house hacking will kill two birds with one stone, give us some more space to expand and allow us to add at least 1 unit to the portfolio giving us 2 total (we plan on keeping the condo as a rental). The problem I am having a hard time wrapping my head around is that when putting a down payment for a house, we will essentially have to start at zero once more, and if we plan on going bigger that means potentially higher mortage with less money to save for future investments.

I am a big fan of BRRRR investing however I am unsure that this is the right option for us with our limited experience and limited funds.

Has anyone been in same situation? Are there other options I am not thinking of?

[Sarita Scherpereel]

Hi Darrel, Bravo for making such big steps towards financial freedom. I'm sure it's hard to imagine what the next chapter is especially coming out of debt.

Your first house hack can be a buy and hold as well. If you buy something that needs a little bit of work. Usually, the eye catching ad value projects help more with ARV in Chicago with rents and refinancing. Most of my clients use their first house hack as their first buy and hold buy looking for something that needs just a bit of work. Nothing over whelming and nothing that is too critical that it must be done right away. There is a bit of strategy to it.

What areas are you interested in living here in Chicago? Neighborhoods can have different strategies and will help me and others on the forum be specific to your interests.