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Primary residence or multi-family property first?
Hey everyone, I'm an aspiring RE investor and currently trying to decide whether to buy a primary residence or a multifamily unit (duplex) as my first property. I've been doing some research and it seems that house hacking would be the best way to enter the market right now. Any words of advice from anyone thats been in the same position? The pros seem amazing; using an FHA loan for the lowest downpayment, having the other unit(s) cover most if not all of the mortgage, the tax incentives, and having the ability to leave after a year then rent both out both units. I'm thinking of just sucking it up for the one year then hopefully using the equity I've gained in the multi-family unit to facilitate the purchase of a primary residence. Does this seem like sound reasoning? Any advice would be greatly appreciated!
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#5 Investor Mindset Contributor
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I think your plan is perfect.
This is almost exactly what my plans are, so of course it sounds great to me! However, depending on the purchase price, I'm planning to put down 20% to provide better cash flow. The cost of PMI kills most deals around me and I'll sleep easier without that extra cost.
@Andre Hollins everybody's life situation is different, but if you can do a multi-family house hack, your going to be way ahead of the game. Assuming you buy right!
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#1 Personal Finance Contributor
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Great plan but I'd go conventional 5% down or USDA or other low down no seller burden loan and get pre-qualified for faster closings.
In addition to lifetime MIP, making FHA more expensive. sellers flinch when they see FHA mostly. Too many seller corrects and longer close times.
Every house I've sold to an FHA buyer needed more than 1 extension.
Buying a multi-family house hacking is a wonderful idea! I did it with my first property and it helped me acquire more properties because my cost of living was very low. I would recommend anybody to go this route. I also used an FHA loan to get the first deal done but as far as financing you have to go with the best situation that fits your needs. Get a rockstar agent to assist you and you will be fine.
Quote from @Andre Hollins:
Hey everyone, I'm an aspiring RE investor and currently trying to decide whether to buy a primary residence or a multifamily unit (duplex) as my first property. I've been doing some research and it seems that house hacking would be the best way to enter the market right now. Any words of advice from anyone thats been in the same position? The pros seem amazing; using an FHA loan for the lowest downpayment, having the other unit(s) cover most if not all of the mortgage, the tax incentives, and having the ability to leave after a year then rent both out both units. I'm thinking of just sucking it up for the one year then hopefully using the equity I've gained in the multi-family unit to facilitate the purchase of a primary residence. Does this seem like sound reasoning? Any advice would be greatly appreciated!
Hey Andre! Welcome to BP! You have the right idea!
House hacking would be the best route for all of the new investors. You will be able to learn the ins and outs of the real estate investing, I believe it will also teach you how it would be like as a landlord. Once you made up your decision, if I were you, I'd work with an investor friendly realtor that knows the area that you are interested of investing in. Make sure the numbers make sense to you.
Good luck out there! If you have any questions, please feel free to connect with you too!
Good luck out there!
I did a multifamily first and highly recommend it. The downstairs unit covered my mortgage and I lived for free, qualified for more loans and bought 8 other properties over the next 10 years. Have refinanced, got a HELOC on it which funded other deals. It was the one that started the snowball. Still own it, and it cashflows $3k/mo! It's my baby
But I would look at all your options, run the numbers on everything and make the best deal you can
Thanks for the feedback everyone!
Hi Andre, welcome to BiggerPockets! You found the right place for information.
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Hey Andre, your plan sounds excellent. Do it lol. You'll figure out all the details by just doing it and not waiting. That's my advice :)
House hacking is always the way to go if your overall goal in this world is to acquire more properties. the extra money gained thru rent plus the experience gained becoming a first time land lord will benefit you in the long run as u start to scale up and add more doors to your portfolio.
@Loren Clive
@Loren Clive My name is Andrea Pressley I'm ready to jump in and get started, just new looking for guidance
Sounds like a great plan, Andre. How's the market in Minneapolis for duplex/triplex, etc. these days?
@Lane Aakhus multifamily househack first, you save so much money. I'm on my 4th househack and have made about $700k in equity so far and have lived for free the last 5 years
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Hey Andre! I think you'll be surprised, I have grown to really enjoy house hacking and as @Jordan Moorhead buying a place you can force some equity in while you live there is really such a great approach to long term wealth building. Living in a duplex is better than an apartment and over the first year you may find you didn't need the extra space a single family home provides. A lot of deals won't look perfect with regard to cash flow, but it's much more about reducing or eliminating your mortgage/rent costs. My next house hack will be the live-for-free one, as I took a more conservative route but our net worth gains have been really exceptional. Feel free to connect and call/email/text anytime to ask questions or if you want to hear how I got started.
Hi Andre,
I am in the same boat as you. I am currently looking at the Minneapolis/St Paul area for a house hack. I am using the BP rental property calculator and input purchase price, loan details, but then when it comes to rental income here are the variables. I put in the rental income the BP rental estimater value, and don't include my portion of the rent. Is that how you are estimating what you owe as the remainder for the mortgage/expenses? Curious if we are doing this the same.
@Andre Hollins, I think that sounds like a great plan. It's something that, looking back, I wished I would have done when I was younger. Getting in and gaining the appreciation, tax benefits, etc is a great way to get started and having renters to help pay your mortgage is amazing. It's also beneficial to gain experience as a landlord, so that lenders can use that income to qualify you in the future. I had a friend do that right out of the gate....bought a duplex in a solid neighborhood, fixed up one half, rented it out while he was fixing up the other half. Then went and did it again the following year. He ended up cashflowing $1,000/mo from each property, so that after 2+ years he had 2 awesome fixed-up duplexes building appreciation and $2,000/mo in cashflow coming in, which gave him a solid foundation to build off of. Are you looking in Minnesota?