First Time House Hacker

23 Replies

Newly married Dallas couple seeking advice on house hacking a duplex.

We currently have 50k in cash ready to deploy and have been researching real estate for a while now so we feel comfortable with the process. However I am seeking advice on finding a duplex. I understand that wholesalers are a good source for off market deals but that does not work for my wife and I as we would not be purchasing with all cash. Should I be focusing on marketing for duplexes myself, working with a real estate agent, or anything else? I am also apart of my local REIA and am in the forums all the time.

Any advice around locating a “house hackable” duplex would be greatly appreciated!

I've been newly married and planning a house hack.   It wasn't my first house hack - but it was my first (and only) marriage.  We actually bought a new duplex in a neighborhood that was being developed.  Most folks on this forum know that you make your money on the Buy but it worked fine for us "paying retail" because it was our home as well as an investment.  In other words, we chose the duplex based on location and how nice it was for us to live in.  The cash flow, investment value, etc. was not our primary consideration on that particular deal.  

After a few years we bought/moved to a SFR. We continued then renting out both sides of duplex. Days turned into weeks and weeks into months and months into years. Then we woke up and many years of successive tenants had paid off the mortgage. The tenants we had attracted we, in many ways, just like us.

I'd do it all over again that same way.  Unless you both love renovation or trying to revitalize a rough neighborhood, etc., I'd make the value of the duplex to you as a personal residence the priority over finding a "good deal" in this particular case  You'll pay more up front but the quality of value to you personally could be worth that extra cost and it will still be paid for by others over time.

I'm being long winded but my advice would be to consider a nice neighborhood of owner occupants even if it means paying more than for a so-called investment property.  

Originally posted by @Paul Burns :

Newly married Dallas couple seeking advice on house hacking a duplex.

We currently have 50k in cash ready to deploy and have been researching real estate for a while now so we feel comfortable with the process. However I am seeking advice on finding a duplex. I understand that wholesalers are a good source for off market deals but that does not work for my wife and I as we would not be purchasing with all cash. Should I be focusing on marketing for duplexes myself, working with a real estate agent, or anything else? I am also apart of my local REIA and am in the forums all the time.

Any advice around locating a “house hackable” duplex would be greatly appreciated!

For a house hackable duplex in the DFW/Dallas area, find a real estate agent, and go thru the MLS. Have them set up a search that shows you all of the duplexes that come on the market.

 Recognize right now at this part of the real estate market it wont have the greatest return, but imo the most important thing is finding a place you wouldn't mind living in for a couple of years while rents and property values go up. But if your goal is to get into real estate, then buying a duplex is the way to go.  

Are you set on Dallas specifically?  or one of the surrounding towns?

If Dallas, I might look in the area near Live Oak/Skillman to the M Streets over to 75..  Most of those are a little expensive, but its a good neighborhood worth living in, and I think the property values there will only go up over time.

I might also look near the Bishop arts district, there are some duplexes there.

I would stay away from wholesalers, honestly for the most part DFW is very picked over, and I don't see much if any discount on off market/wholesale properties in this market.

And unless you have some experience in rehab/construction, I would go with something that was more or less move in ready for your first property. It will be a lot less risk.   Most wholesale deals will involved some rehab.  

  IMO a first property/house hack is just getting you started, you don't need to hit a home run, a base hit is perfect.  you just don't want to strike out on your first at bat.

Let me know if I can help, I have some contacts, and have a couple of Bigger Pocket members that I might recommend for real estate agents.

Originally posted by @Scott P. :

I've been newly married and planning a house hack.   It wasn't my first house hack - but it was my first (and only) marriage.  We actually bought a new duplex in a neighborhood that was being developed.  Most folks on this forum know that you make your money on the Buy but it worked fine for us "paying retail" because it was our home as well as an investment.  In other words, we chose the duplex based on location and how nice it was for us to live in.  The cash flow, investment value, etc. was not our primary consideration on that particular deal.  

After a few years we bought/moved to a SFR. We continued then renting out both sides of duplex. Days turned into weeks and weeks into months and months into years. Then we woke up and many years of successive tenants had paid off the mortgage. The tenants we had attracted we, in many ways, just like us.

I'd do it all over again that same way.  Unless you both love renovation or trying to revitalize a rough neighborhood, etc., I'd make the value of the duplex to you as a personal residence the priority over finding a "good deal" in this particular case  You'll pay more up front but the quality of value to you personally could be worth that extra cost and it will still be paid for by others over time.

I'm being long winded but my advice would be to consider a nice neighborhood of owner occupants even if it means paying more than for a so-called investment property.  

 Spot on, I agree with this 100%.

We did something similar, only in our case that not so great cash flow property skyrocketed in value and we pocketed 80K in just a couple of years.

Nothing wrong with finding a good agent - that's what they do!

I think the house hack is a great way to get started and a duplex is even better. You could live in one side while you fix the other, then move into the fixed up unit and fix the second one. Of course you would have to pony up for the entire mortgage for a bit.

Have fun and be safe!

@Scott P.

Thank you so much for the response. I think that you and @Bart H are spot on. I was really thinking about going for a fixer upper but for my first house hack a base hit without the stress seems like the way to go. I’m glad this has worked out for y’all in the past and I will keep everyone updated as me move forward!

I have seen on the forums that Kenneth McKeown is a reputable agent here in Dallas and I would love to hear of other agents I can talk to as well.

Another thought I have is that the 50k is not enough in most places here to put down 20% and we are bringing in another 2.5k or so a month of available cash, should I wait to avoid PMI or should I even be worried about hitting the 20% at all since I can go with a low FHA down payment loan?

Thanks in advance!

@Bart H.

Thank you again for your response. To your question about location, we are open to the surrounding towns as well and will definitely look at those areas you pointed out. Based on the book “set for life” (fantastic read if you haven’t already) we want to focus on keeping our commute reasonable as that can become a strain on both time and money. My work location is flexible being either South Plano off 75 or downtown while my wife works South of Richardson.

Originally posted by @Paul Burns :

@Scott P.

Thank you so much for the response. I think that you and @Bart H are spot on. I was really thinking about going for a fixer upper but for my first house hack a base hit without the stress seems like the way to go. I’m glad this has worked out for y’all in the past and I will keep everyone updated as me move forward!

I have seen on the forums that Kenneth McKeown is a reputable agent here in Dallas and I would love to hear of other agents I can talk to as well.

Another thought I have is that the 50k is not enough in most places here to put down 20% and we are bringing in another 2.5k or so a month of available cash, should I wait to avoid PMI or should I even be worried about hitting the 20% at all since I can go with a low FHA down payment loan?

Thanks in advance!

 Kenneth is one of the folks I was going to mention.  He showed us an off market duplex a year or so ago.  I thought he was a straight shooter, the seller just wanted a little bit more than we were willing to pay.  

But I think he would be a great choice.

We also have been working with @Megan King , she is an investor and real estate agent and we really like her.

Personally I Would avoid FHA financing, in Dallas, most sellers don't want to deal with buyers who have FHA financing. The inspections and hassle is bad.

I might talk to a mortgage broker, it used to be you could get an owner occupied mortgage for less than 20% down on a duplex. Doing it from memory but the mortgage we got in 2013 on our owner occupied duplex was a 90% or 95% loan with PMI.

I don't know if the guidelines have changed since then as all of our subsequent purchases have been SFH's.

My guess is you will be in the $400K price point give or take for a duplex. So I think 50K would be possible. Send me a note offline and I can recommend a mortgage broker that we like and have used a bunch.

BTW, we haven't worried that much about PMI. IF you want, save up the money you get from the tenants to pay down the mortgage early. IMO the more important thing is finding the right property. That might take a month, it might take a year.

Best of luck to you!!!

@Bart H. I'm a local mortgage broker, and you are correct that someone can house hack with a Conventional loan with less than 20% down. A primary residence 2-4 units requires a 15% down payment for a standard Conv loan. The less-known HomePossible program (Conv loan) allows 5% on a 2-4 unit. I almost always recommend HomePossible to my clients who are house-hacking over an FHA loan, when they qualify for HomePossible. @Paul Burns I can explain the differences in more detail if you'd like. 

I'd also note that in my experience FHA loans don't have a stigma with sellers in DFW 95% of the time. I've completed dozens of FHA transactions in the last few years with little no fuss from sellers or listing agents, and rarely have appraiser-required repairs.

Also, @Bart H. is spot on with real estate agent referrals. Both @Kenneth McKeown and @Megan King are great agents whom are both investors themselves. I've done many transactions with both KC and Megan, and I'd highly recommend either of them to you! You'll see both KC and Megan recommended time and time again here on BP, and both very engaging and helpful on the forums. 

Lastly, PMI is negligible as long as your cash flow makes sense, and when you have the opportunity to purchase a property with less cash invested the benefits of opportunity cost and saving that cash for other investments almost always outweighs the cost of PMI. Personally, I'd take PMI every day of the week if I could continue to stack up properties at 3% and 5% down.

@Paul Burns

I’d recommend finding an investor-friendly real estate agent to go over possibilities with. Like others have mentioned, go with someone who is referred by others, and who invests themselves. If they don’t have any rentals themselves, then they are basing everything off of theoreticals, which is an unnecessary risk.

Originally posted by @Tyler Hodgson :

@Bart H. I'm a local mortgage broker, and you are correct that someone can house hack with a Conventional loan with less than 20% down. A primary residence 2-4 units requires a 15% down payment for a standard Conv loan. The less-known HomePossible program (Conv loan) allows 5% on a 2-4 unit. I almost always recommend HomePossible to my clients who are house-hacking over an FHA loan, when they qualify for HomePossible. @Paul Burns I can explain the differences in more detail if you'd like. 

I'd also note that in my experience FHA loans don't have a stigma with sellers in DFW 95% of the time. I've completed dozens of FHA transactions in the last few years with little no fuss from sellers or listing agents, and rarely have appraiser-required repairs.

Also, @Bart H. is spot on with real estate agent referrals. Both @Kenneth McKeown and @Megan King are great agents whom are both investors themselves. I've done many transactions with both KC and Megan, and I'd highly recommend either of them to you! You'll see both KC and Megan recommended time and time again here on BP, and both very engaging and helpful on the forums. 

Lastly, PMI is negligible as long as your cash flow makes sense, and when you have the opportunity to purchase a property with less cash invested the benefits of opportunity cost and saving that cash for other investments almost always outweighs the cost of PMI. Personally, I'd take PMI every day of the week if I could continue to stack up properties at 3% and 5% down.

I think on a duplex, he will be competing with other investors and an FHA deal will be less likely to go thru as the seller will be more likely to go with all cash, or conventional financing.

I know if we are selling and had the choice of two different buyers, one with an FHA loan, and another with conventional financing, we would go with the conventional buyer.

I agree with you on going with a 5% down over an FHA loan if possible.

 the most important thing is getting started.

@Paul Burns

In my case, I found a great real estate agent first. Then I targeted the area where I wanted to live (schools being very important). And, there were exactly zero duplexes for sale in that part of town. So my real estate agent targeted duplexes for rent and asked owners if they’d sell instead. And one of those owners said yes. It worked out well because I was the only one negotiating with the seller, and because one side was for rent we didn’t have to worry about a unit being vacant for move in.

@Paul Burns

I had the 20% down, but I chose to do the 3.5% fha loan and keep more funds for the next deal. Just work your numbers to determine. For example, I was paying $1,250 rent, and after rent from the other side, the duplex I first bought meant we'd pay $800 to finish out the PITI. Also run your numbers as if both sides are rented out to make sure it cash flows after you move out.

@Paul Burns congrats on the marriage and best of luck on your search! My wife and I bought a duplex in October to house hack. We found ours off market. As a newlywed couple, you can pull the heart strings unlike an investor. I would write hand written notes and door knock owners of duplexes you want and track one down yourself. I am fortunately a realtor so I was just able to negotiate and navigate the transaction easily but definitely get a realtor on board even if you find it yourself, you should have an agent work the transaction for you.

I wouldn't pay PMI. I never have. Seems like a total waste of money to me.

With that said, I understand it's just a cost and is not so different than any other cost.  So, I can understand that some people pay it and don't mind.

@Paul Burns

Have you considered house hacking a single family home with an in law suite on AirBNB, HomeAway and Booking. Duplexes are super hot because everybody wants to househack so my advice would be to call on duplexes for rent and see if anybody will sell on installment payments, as they have a vacancy already.

I've house hacked five times and recommend it to everyone who will listen. I would second the recommendation to use the 5% down HomePossible conventional loan, and put the rest of your funds towards another investment. 

In my opinion, there's enough to learn with your first purchase that it's generally better to buy something relatively turnkey. You won't get a screaming deal on it, but if it cash flows and gets you in the game (and pretty much living for free), it's a great way to get started. It's so much less stress and headache if you'll be living there, and there will be many years to buy fixer uppers and value adds down the road. I'd find a good investment minded agent and look primarily on the MLS.

Good luck getting started!

@Paul Burns

Hey Paul,

I am currently doing my first house hack here in DFW in Grapevine. Just wanted to comment on doing a rehab is a huge time commitment. If you are going to do the rehab yourself. Plan on spending every weekend there for a few months. Honestly, it’s been an amazing experience, because then you have some way to gauge bids from contractors and get a better sense of material costs.