Has anyone done a successful house hack in the Bay Area? I would like to try and do one as my next step, but the numbers don't seem to work anywhere. There are a few large houses in Vallejo that might work, but I would prefer a MFR. There are some 4plexes in Berkeley and Oakland, but between the high transfer taxes and rent control, the numbers just don't add up. I need to drive down to Mountain View three days a week, so it would need to be around an hour from there. I don't need to cash flow, but obviously that would be ideal. Thanks!

Originally posted by @Max McNally :

Has anyone done a successful house hack in the Bay Area? I would like to try and do one as my next step, but the numbers don't seem to work anywhere. There are a few large houses in Vallejo that might work, but I would prefer a MFR. There are some 4plexes in Berkeley and Oakland, but between the high transfer taxes and rent control, the numbers just don't add up. I need to drive down to Mountain View three days a week, so it would need to be around an hour from there. I don't need to cash flow, but obviously that would be ideal. Thanks!

 A lot of the legacy BP content was made by folks in the midwest in 2012. You're in the Bay Area in 2018, very different reality.

Here, it's mostly about managing/minimizing your personal housing expense since, as you observed, it's tough to find a triplex where rents from the other 2 will cover the full PITI. Not impossible, but tough.

So the way to think about it is add some flat amount to your PITI for maintenance, subtract that from how much rent you are collecting, and see if that's more or less than what you'd otherwise pay in rent for something similar. Here's kind of how this plays out in the Bay Area...

Let's use $500/mo for maintenance, for now, and assume PITI of $7000. So that's $7500. And let's suppose you are reasonably confident you can get one of the other two units up to market rents of $3500, but the other unit in the triplex is probably stuck at $2000 for the foreseeable future because the only way that tenant is coming out is feet first. $5500 coming in, $7500 going out. $2k in the red. But if you would otherwise be paying $3500/mo to rent a similar property, now you're $1500/mo in the green. And if you're a single young person with no kids, you can look at renting out the extra space in the unit you are living in to boot.

And then recall that after 1 year, you've fulfilled your owner occupancy promise. So you can move into a studio, and rent the entire unit you originally occupied out. So now you've got $3500 + $3500 + $2000 = $9000 coming in, $7500 going out, and you own an asset that is incredibly likely to appreciate quite well if you zoom out to the 10-15 year time-frame.

Also, don't limit yourself to long term renters during your analysis. If you're open to a bit more hands on work, you can get into the STR/Airbnb game which can notably increase your income. House hacking is perfect for this, since most areas are restricting airbnb to owner occupied units. Many of the "unwarranted" in-laws in San Francisco are set up perfectly for an owner occupied Airbnb.

@Chris Mason That's a great way to look at it. Plus with the mortgage interest deduction vs renting you would be saving even more money.

@Chris Mason As a lender, have you seen anyone get a multifamily deal done with an FHA loan in the East Bay? I was told they don't typically get accepted since there are more stringent requirements, and sellers usually can get a better conventional offer. Any advice on making an FHA offer more competitive? Thanks for your expertise!

Originally posted by @Max McNally :

@Chris Mason As a lender, have you seen anyone get a multifamily deal done with an FHA loan in the East Bay? I was told they don't typically get accepted since there are more stringent requirements, and sellers usually can get a better conventional offer. Any advice on making an FHA offer more competitive? Thanks for your expertise!

Funny, I was just sending this to an agent. It still wont be as strong as 20% down, but your offer at least wont be immediately thrown in the trash like many agents in the East Bay like to do with FHA offers on multi-unit.

I don't preapprove for FHA 2-4 unit in the Bay Area unless absolutely necessary since writing preapprovals for the above is about 10x as productive a use of my time (read: 10x more likely for you to have an offer accepted before you burn out and give up) compared to FHA in the 2-4 unit space. We're in a tech savvy place, so essentially everyone in Oakland, San Jose, etc, has found this very website and gotten excited about FHA 2-4 unit... listing agents have gotten wary of dealing with the FHA stuff on our 60+ year old housing stock.

Don't assume that if you make decent money you are over the income limit. Something like 85% of Oakland has an income limit of "no income limit," meaning we use this "modest income only" program for tech employees pulling $300k+/yr.

Originally posted by @Max McNally :

Has anyone done a successful house hack in the Bay Area? I would like to try and do one as my next step, but the numbers don't seem to work anywhere. There are a few large houses in Vallejo that might work, but I would prefer a MFR. There are some 4plexes in Berkeley and Oakland, but between the high transfer taxes and rent control, the numbers just don't add up. I need to drive down to Mountain View three days a week, so it would need to be around an hour from there. I don't need to cash flow, but obviously that would be ideal. Thanks!

I'm currently hacking a large sfh in Vallejo.  Let's connect!