Trying to house hack as a young buck
Hey everyone, I’ve been lurking through comments the past few months and here goes my first post. I’m looking to house hack a duplex really anywhere south of point of the mountain here in Utah (or possibly north if I luck out). I got pre approved for up to 400k and I’m wondering if in the crazy market I really even stand a chance to find something less than that? I know the 1% rule is out of the question, but I’m okay with a few years without cash flow since the equity growth here has been crazy. I guess my question is would I be able to find something reasonable with my current situation?
I appreciate the help in advance!
@Tanner Webb Is your qualification based on single family purchase? I think a duplex in that price range would be difficult but not impossible necessarily. However, keep in mind that when you purchase a multi unit it increases your purchasing power. I’m general, you get 75% of the rents from the second unit towards your income/ qualifying. So if one side rents $1,000 you get $750 towards income. As a quick reference, I would say each $50 increases buying power by $10,000. So in this case $150,000
Which also means a $250 car payment decreases buying power about $50,000.
What Cherie said is spot on. Make sure your lender know what your plan is if they don’t already. As far as finding a property goes, it’s possible, but difficult. There are actually more multi units available than last year because people are taking advantage of the high prices and seller their investments.
If I were you I’d be analyzing every duplex that pops up so you get good and fast at it. I’ve got a spreadsheet I can send your way if you’d like, or use the BP calculators.
There’s also a lot of strategies to find off market deals if you and your agent are willing to put in the work.
@Cherie Orellana @Garrett Christensen I appreciate both your responses! My lender does know this is for a multi family property. I’m not sure if they have factored in the cost of the other rents though- do they wait to do that until you’ve found a place? They haven’t asked me questions about it.
Also, Garrett, that's what Im seeing as well- people unloading properties to profit and they'll are top dollar. The duplexes (or lack of) on realtor for my range are priced high and with some quick numbers crunching don't have great COC return or even close to the 1% rule. I'll talk to my realtor about getting creative.
A second thought, I’m young and can afford change. Wonder if it makes better sense to save for another year and move to the Midwest and be able to get what I want.
@Tanner Webb Good Idea man! That's actually what I'm doing right now with a single family house. I have 3 roommates and it covers a decent part of my mortgage on a single family house. I wouldn't close your mind to something different than a duplex. You can get a great single family house, with less repairs needed than some of these duplexes that will be a great first investment.
Tanner, I think you will need to welcome creativity to find something that works, but it certainly is not impossible. Our first purchase here in the valley was a duplex in December of just last year; we house hacked it just as you are looking to do. I saved the BP calculator that I ran on that deal because it was our first big plunge into this REI stuff. :) Once we were in our unit, we were "paying rent" (to ourselves of course) to the tune of $700 a month. We have since moved out and already the duplex is cashflowing $500 and change per month. I do think that if you got into something now, you could probably still head to the Midwest if that's what you ultimately are looking to do, but you could have a cashflowing property here in UT.
One tip, work with Cherie if you haven't yet! She helped us nab our 2nd property which is why we moved out of our duplex hack so quickly. She has a very creative think outside the box approach to help find what you want and submit offers that stand out. Not to mention she's pretty well connected here. Look forward to your househack updates :)
Tanner, did you end up buying a duplex? It's a great idea if you can swing the numbers. I would be happy to help you look. My first purchase was a SFR with a basement rental. It might also be worth looking into a 4 or 5 bedroom home and renting out the bedrooms. There is a lot of demand for single bedroom rentals as well. Let me know if you want to chat.