Rental Property Investor · Oakland, CA · Member since 2016 · 602 posts · 250 votes
Hello BP,
I been pondering the idea of doing a FHA loan for a house hack. Like most people, multifamily homes in the Bay Area are very much out of my price range. I was thinking about starting with a single family home using a FHA Loan, rent out the other room (I was looking at 2 BD, 2 BA properties in Fremont, CA around the 700-850k range). Hopefully secure a property with enough equity to use a home equality line of credit and buy a 2nd property in the area. Work the numbers to have the next tenants essentially pay for the mortgage. I been reading on a number of forums that this strategy in the Bay Area does not produce any cash flow. I am hoping if there's anyone on BP that can improve my vision and plan before I start to execute this idea.
Rental Property Investor · Oakland, CA · Member since 2016 · 602 posts · 250 votes
9y
Hi @Andrew Wong, that is a good point. I will also look down into SJ as well. My prime focus has been on Fremont, Cupertino and Mountain View but out of the 3. Fremont seem to be the only area within range. Have you had first hand experience with purchasing mulit families homes in SJ? Could you briefly share an overview on how it cash flows?
Investor · Milpitas, CA · Member since 2015 · 278 posts · 155 votes
9y
@Bryan Pham, well, those other two some extremely pricy areas. Good luck finding an investment there. Of course it's possible, but you'll put in more time and effort.
I don't have experience buying property in the Bay Area, other than attempting to find something within my budget and failing to. Sorry.
Fremont, CA · Member since 2015 · 47 posts · 6 votes
9y
@Bryan PhamMission school district in Fremont is also pricey so depends on the neighborhood within Fremont. I am not sure if you are looking for a primary house and then "house hacking" or do you want to purchase investment property
Lender · Milpitas, CA · Member since 2016 · 376 posts · 248 votes
9y
@Bryan Pham The house hacking strategy works if you can get a house at a price that supports the rents. For example, if you bought a house for $800,000 with 20% down, you're looking at a $640,000 loan, which translates to $3,100/mo mortgage. On top of that, you're looking at another $1,000/year for insurance and $8,000/year for property taxes, which comes out to a total monthly bill of $3,850.
To successfully house hack this property, you would need to rent out 3 rooms and a garage. Sounds familiar :).
Once you purchase the property, you will need to wait a few years before you can take out a HELOC on it. Most banks will only give you up to 70% of LTV, which means you need to have at least 30% equity. Since you only put 20% down, it'll be a while before they'll give you that line of credit. This changes if your property appreciates, of course!
Don't be in such a rush to buy a house, you have a good thing going.
Oakland, CA · Member since 2015 · 49 posts · 40 votes
9y
Tough to find properties like that in Fremont. I've been looking myself and the economics don't make sense unless you're banking on the property appreciating 10% year over year again (which is a risk).
Fremont is building. A lot. Lots of condos and sfhs getting built and the schools are already at capacity, so the next 5 years in Fremont will be interesting.
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
9y
This is my 13th year FT. I can tell you no sellers will consider a low down in Mv, Cu or Fremont. To get accepted you need to have a clean contract with no contingencies with high down. Reason for that these areas described your offer has to be higher than historical highest and appraisers will not agree with your purchase price. You pitch in the difference on the contract. Every used home has a flaw or two and many homes will not be approved for FHA. Expect sellers to fix termite, clear permit issue accept a FHA and disregard high down or cash? The only deals I have accepted is 10% down or more single br low end. Even at that price range many people just pay cash. I have seen a few FHA accepted is east San Jose. The home prices there are now close to 800K and price goes up daily. If you see home near McLaughlin/ Curtner Ave the seller is asking close to a million you know how hard it is to get a property at a price one feel comfortable.
Suggest you save more for at least 20% conventional in SFBA.
Oakland, CA · Member since 2015 · 49 posts · 40 votes
9y
^ A friend of mine just bought a SFH in Fremont; 10% down, 10% HELOC, 80% financed so PMI was avoided. It can be done - you just need to find the right property who with a lot of work and a bit of luck.
Investor · Miami, FL · Member since 2016 · 75 posts · 23 votes
9y
I will consider out of state. California will be the first state that will crash. Prices to high. They approved health insurance for all immigrants, which leads to higher taxes.
You should use the rental calculator and adjust the numbers to understand on how the deal could make sense. You will find high and low cash flows over here in Miami. All depends on the deal, and it's math.