House hacking a duplex

12 Replies

I’m looking to approach a seller of a duplex for 294,000.. This would be my first rental property. I will be house hacking. I sent a message and honestly did not think I’d get a response, but I just did!!! So it’s 294,000. 1250 per unit. I was going to ask for 290,000..4,000 at closing and 7% interest monthly payments with a balloon payment at the end of the one year mark. I’m just not sure about the 7%.

Hey @Julie Goodwin , welcome to the Biggerpockets forums!  

If the amortization period of the loan would be 30 years then 7% would look fine and dandy to me, but I would push that balloon date out past a year . . . it's amazing how long things can take in the financing process can take and I'd hate for you to be staring down the barrel of a balloon payment just because a lender dropped the ball or the Mortgage Investing community changed their underwriting guidelines in the midst of your refinance.

Also it occurred to me . . . the primary "hack" aspect of a house-hack is the low-downpayment financing . . . notably FHA 3.5% down financing.

If you can seller finance it with low money down using seller finance then I'd skip the part about living in the duplex, owner finance that one and get it cashflowing, then house-hack another one. 

Originally posted by @Julie Goodwin :

@Will Fraser

Thank you so much for your advice Will! In your experience, how long are sellers willing to push back the balloon payment?

That varies based on the seller and the loan terms in place before the balloon.  If the loan itself is a positive investment situation for the seller (which a 7% rate first mortgage would constitute in my book) then the seller-lender would likely be apt to hold it much longer than they would otherwise.  I've seen 18-month, 24-month, 72-month, and 15-year balloons and the variation seems to come down to what the seller wants/needs out of the deal.

If they are a "hair on fire" type of person then they'll likely need the money sooner, though, so put on your empathy goggles and peer into their motives :) 

@Julie Goodwin it looks like you're trying to potentially DIY here which is great, but you may be be better served by just working with a lender and an agent.  Is it somewhere you'd want to live?  And will it cash flow after you move out?  $2500 in rents for $294K isn't bad but it's not great either.

@Julie Goodwin congrats on jumping in! I would also echo the sentiment on the thread around trying a conventional financing route...when I did my house hack and duplex to start the 3.5% fha loan was the best part. Sure we will have to refinance later to get out of PMI but that low down payment for an owner occupied building is really where the power of the house hack comes from. Cheers!

@Julie Goodwin you should look into conventional loan programs as well. I was able to finance a house hack duplex in January using Home Possible (I believe), which has some restrictions, but I was able to do 5% down and I'll be able to get rid of PMI and keep my interest rate which was important for me since the rates are at record lows. I'm not doing major renovations to force appreciation so a refinance isn't a requirement, but something you can consider

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