I've seen different opinions on finding homes to house hack: look for small multi-families, find homes that have finished basements / or ADU, find homes to make a duplex out of OR don't do any of the above. For a first time investor, what are the pros and cons of buying a SFR and converting it into a duplex versus going ahead and purchasing a duplex. In my area (Raleigh, NC) for a duplex, my lender is requesting 5% down payment and 6 months of reserves equaling PITI, which would leave me at $0 in savings. Versus a single family home purchase would be 0% down. I'm trying to weigh my options.
@Lucero Galvan My first thought is you have to go with what makes sense on paper. Not sure if being cash poor with no reserves is a good idea for a first time investor. If the 0% down SFR route cashflows when you "rent by the room" that would be a great first investment. Don't force a deal just to get in the game if you're not financially ready, but make a game plan to get to where you need to be as quickly as possible.
Hi Lucero, I'm not sure I am the most qualified to suggest an answer, but I'll give you my perspective. Me and my wife are doing a hack and renting the basement (ADU) and we have loved it so far. We got it for 3.5% down which was way nice. I think from what you're saying is seems like it would be less up front for a SFR, but it would also take money to convert a SFR into a duplex. So that's one thing I would weigh. Also the time you are rehabbing you are missing out on rent. Lots of factors for sure, but I'm definitely a fan of the house hack!! Best of luck!
@Lucero Galvan My first thought is you have to go with what makes sense on paper. Not sure if being cash poor with no reserves is a good idea for a first time investor. If the 0% down SFR route cashflows when you "rent by the room" that would be a great first investment. Don't force a deal just to get in the game if you're not financially ready, but make a game plan to get to where you need to be as quickly as possible.
You need to be very clear on your personal goals. Everyone has a different opinion because everyone's situation is different and unique to them! If "I" were in your situation I would forgo using all of my cash for a duplex in favor of a 0% down deal! Renting by the room and either converting to a duplex later (using the cash flow from the previous year) or moving and renting the entire unit as a sfh.
Thank you all for your feedback. @Nate Arrington, you mentioned that you're renting out your basement as an ADU. I may be getting too technical, but how is your basement set up to allow this? Many of the homes in my area have 100% underground basements or half of it is undergound with only one wall having windows (split-level type homes). Have you had any feedback on this or how did you make it work for the tenants to have access to basement (I.e., basement kitchen / bathrooms, separate entry / driveway, windows along the main living areas)?
@Lucero Galvan So the house we’re in is kind of unique because there are no stairs in the inside, so the basement has its own entrance and is totally separate from the upper level where we live. I have seen them though where there is a shared entrance and then you can go up or down, with doors in the right places for privacy at the entrance