Duplex House Hacking

41 Replies

Is it a good deal to get a duplex (for the purpose of house hacking) if you paying small amount from your pocket every month to cover all the costs?

Beginner here looking to get into my first duplex/househack as soon as I graduate in December. To precede my reply.. Of course, making money and becoming financially free is the reason we are looking at real estate in the first place..

With that being said, I am looking into a duplex, 4x2/side, that would carry around $1178/mo in expenses (including cap-ex, vacancy, repair costs put aside/mo) and would bring in 1000/mo in rental income. As a 22 yo and beginning investor looking for a house hack, I do not mind breaking even or even spending a little bit out-of-pocket per month. This is simply because I know that I am still saving a tremendous amount on living expenses, and it will be cash-flowing something serious once I get out of there. Everyone has their own criteria in regard to cash flow, ROI, yadayada, but I think simply not having to pay housing is pretty cool as well.

@Kendall Short

Yeah, I have a similar plan and graduated last year. I live in Pinole CA and it is really expensive. I do not want to invest far in the beginning so house hacking will be the right thing to do for me TOO. 

I calculated  numbers on some of the properties and I saw that I will have to pay some money out of my pockets but way less than my current rent. 

Do you think a triplex or fourplex will be better than duplex? 

I think most people here will say bigger is better. It just depends on what you can finance and how many tenants you’re willing to take on. With a duplex HH, you are depending on the property to always be full. If not, you’re paying the entire mortgage. With a 3 or 4, you can have a vacant unit and still have some rental income coming in to help out with the pay down.

It all comes down to whether it’s a great deal or not.

You will NOT cash flow while house hacking. You should however have the majority of your expenses paid for by the rental income....once you move out (if you choose to do so) then you should be cash flowing.

If all your expenses come out to $1,200 (PITI, Cap Ex, Vacancy, Maintenance, etc.) and rental income is $1,000 then you are paying $200 out of pocket every month to live...this means your personal budget will THRIVE and allow you to save much more per month.

That’s where my head is at currently, Steve. I think it’s a great place to start.

Yeah that makes sense. I need to do my due diligence to make sure it is a good deal. 

About financing, as this will be my first buy it might be a bit easy to get the financing. Ideal will be duplex because fourplex are way higher range than I feel comfortable with in the beginning. I will do the FHA loan so the down payment will be low too.

Any suggestion on that process?

PM if you want.

I'm 24....house hacking (FHA) on a 4-unit and paying close to 0 per month.

Make sure to factor in PMI with your analysis. Also, shop around and talk to different local lenders and see what they’ve got in regards to down payments. I can get 5% conventional here for an owner occupied with the PMI falling off after the 20% equity mark is hit.

@Steve DellaPelle  

Definitely, this will totally change the lifestyle as there is little to no money going towards the rents and that is the biggest expense. 

You think going to a realtor to help you find such a duplex or triplex will be right strategy or what other way will work better?

@Hardeep Singh From my experience, it is still possible to find a "good" deal on MLS so working with a realtor is definitely worth it. They will give you access and help you along the way (mostly being paid for by the buyer) but make sure to get someone who understands what you are trying to do and has experience with investments rather than traditional home purchases

@Kendall Short

Great advice. So, basically 5% down and what was the PMI?

@Steve DellaPelle

Yes, it make sense to go with a good realtor if they understand what your motives are.  So do you have a list of items you give to the realtor when you approach them ?

@Hardeep Singh  Tell them your goals....you want to live in a multi-family and rent out one side while living in the other. Tell them you expect to pay ___ amount down and plan to use ____as your financer (get pre-approved before you are serious about sending offers). Give them additional information on your desired locations as well as your price range.

Once I sent my agent my criteria, I was waking up to emails every day with properties out on the MLS that matched with me.

In addition, I did my own side research on Trulia, Zillow, Redfin, etc. to find even more properties. If I found one I liked I sent it to him and asked for a showing to be scheduled.

@Steve DellaPelle

Great.  Did you talk about the cash flow to them or market analysis related to if this is the right time to buy because here in california I believe prices are way high. 

I mean if i buy it for a long haul and don't speculate then i might be fine?

Like Steve said, connect with a realtor and ask to be placed on their mailing list. You will get notifications within a day of them being put up on the MLS.

Minimum of 5% down with the PMI on a 150k at around $70-80/mo. I would recommend putting down a little more to not get TOO overextended. PMI is not a problem for me though, as it allows me to get into a property quicker and save 1000’s up front.

I'm in a similar boat to @Hardeep Singh . My area is very expensive, and even duplexes are selling for 400k. It just means looking deeper for a deal. But I'm definitely looking at 4plexes. The numbers just work much, much easier.

@Kendall Short

Great. Make sense. So, do you have to have PMI I guess? Definitely, I will factor in the PMI. Thank you.

@Robert Freeborn  I'm in the Boston area so I can relate to the high prices...I took a pretty big sacrifice house hacking in an area that is almost an hour away from the city where I work but the numbers were so good that I had to go for it.

@Hardeep Singh As for asking about the "right" time to buy...that is a completely different question and one that has no answer....my best response to that is:

If it cash flows, it cash flows.

@Robert Freeborn    What do you mean by numbers works easier? A little confused here.

@Steve DellaPelle     I can definitely go an hour far for lower prices but it is a big sacrifice as my family live near my current area. Make sense, as long as you don't have to pay much for living or it cash flows it make sense. And if you are not speculating and looking for a long haul then it will be more safe.

@Hardeep Singh If your tenant in the duplex leaves, you have turnover time where YOU have to pay the full mortgage/expenses. With a 4plex, you have 2 other units to take up the slack. Also, depending on where you are at, the cash flow can be MUCH better. But it all depends on the market.

@Robert Freeborn  

Yes, that definitely make sense. I would rather get a 4plex as you will get more exposure to the REI, however, 4plex are way higher in price in my area. So I might have to move out an hour or 2.

Or I mean at the end of the day if you get financing it does not matter much if the 4plex is expensive because someone else is paying for it assuming you get a great deal.

Exactly. Just crunch the numbers on everything and go with what works best.

I pay nothing out of pocket with my house hack. I would still take paying a portion rather than the whole amount!

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