Hello my fellow BP Members,
As I mentioned, I'm a new investor and my wife and I are currently trying to purchase our first investment property. We are extremely excited, but yet nervous and admittedly have developed a strong case of "Analysis paralysis". We are located in Broward County Florida, and the market here is ridiculously high and competitive. We are taking full advantage of the FHA loan with purchasing our first property. Now here is where we can't seem to come to an agreement. I love the whole "House Hacking" strategy with purchasing a small multifamily property (1-4 Units), living in one units and renting out the other. That makes perfect sense, but the problem we're having here in South Florida is our multifamily are crazy expensive. Even looking a few miles north/south of our current location is not working out number wise.
My wife approach is to use the BRRRR strategy which she feels works better in our market. Now, I must admitâ¦I agree. I have read countless books on investing, and the Housing Hacking strategy makes so much sense to me. Maybe you guys can help..which strategy makes more sense?
I would love to hear some feedback from members who investment partner is their spouse, but I would be more than grateful to hear from an expert.
@Jonathan Patterson Both strategies are great and work by taking advantage of leverage. Personally I feel that going into a FHA purchase first is the right way to get your feet wet. There are less risks associated with the rehab and refinance and requires very little cash. After your first FHA purchase your houses expenses will be reduced and you will start to build equity. From this position you will be able to accumulate capital more quickly for your next purchase.
Also consider your resources. For a BRRR you will need to have more cash because you cant mortgage repair expenses. Also properties that are in large disrepair and thus a price discount might not qualify for a conventional/FHA mortgage, more cash and more risk.
Your perspective is that you have to do one or the other. Why not both ? but in a sequence that makes the most sense.
I think house hacking first is your best bet. You get so many lending advantages by being an owner occupant. Run the numbers and make an offer that makes sense.
Hello Jonathan Patterson !
I agree with your assessment of the market, it is competitive here in S Florida.
However opportunity is always there if you know how to look for it.
I'm gonna have to side with the House Hacking strategy for this market. Rental properties are on the rise.
There is a big shortage of affordable single houses in this current market and more and more millennials are turning renting (due to low wages and mainly because they saw their parents suffer the 2007 crash which hit FL specially hard)
If you have a rental property you'll always have occupied, plus, using the FHA loan bears less risk and maybe no work assessment. All you have to do is calculate the rent in the area (which is super easy).
You can always reach me if you want to talk, I'm a real estate agent here in Pembroke Pines.
@Jonathan Patterson depending on your family dynamics some strategies may be better than others. For example, my wife and I have 4 kids and living in one unit of a 4 plex wouldn’t have worked well for us. So we found a property that had great potential for a value add option by building out the attic and adding 2 bedrooms, a bathroom/laundry room and a loft that would increase the square footage by 800 square feet. The house also had a guest house in the back that would work as a rental to lower our monthly mortgage payments. This is a combination of a house hack and live in flip with added value causing forced appreciation.
If we had a small family then we may have purchased a small multi and lived in one unit and rented out the others.
Being that this is your first start you may need to be a bit forgiving. If you are getting out of the crazy rent market you have one step in the right direction. If you are going FHA I would assume you limited like most entering that cash down is the issue. In that market if you can even find a reasonably priced SFR that meets the basic FHA, or you could solve the small problems it might have. You could push some equity with just a few improvements over a year or two. Then sell move on with some more equity hopefully some nice appreciation as 5% is the safer guess right now. With values on the rise and interest rates expected to go up it could cost you quite a bit to wait to find a perfect deal.
So maybe if you alter you entry strategy to lower cost and build equity slower to build that long game wealth. It could get you in the game now vs not entering or waiting and it costing you extra. Add up with you will save vs rent the added cost of if rates rise by %.5 or %1 and the possibility of %5 year over year appreciation and any simpler home improvements you could do to add equity. Then take those numbers and look at a house hack or true investment property in 2 years.
Getting into house hacking can be hard in markets with very high rent demand. Some markets mulit family is all but forgotten about by anyone other than investors other markets people see the value and drive the demand higher.
@Noe Perrin Thanks a lot for your input...Yes, why not do both. If we are able to rebound after our first purchase with lower expenses quick enough I don't see why not. Great advice, thanks again Noe.
@Shiloh Lundahl you are absolutely right, family dynamics plays huge part. It's just my wife and son, so its makes it a little more flexible as oppose to a family of six. Thanks for you input Shiloh. We greatly appreciate it.
BTW, very creative how you fixed up that combination.
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