First Time Home Buyer

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House Hacking a Condo?

Posted Jun 10 2022, 22:46

Hey everyone, great news, I'm in the market to buy my first home! The bad news is that Orange County is insanely expensive, which is why I want to house hack. However, there's not that many multi unit buildings that can cash flow and they all cost 700k or more. Then I realized that I might be able to house hack a condo. The one I am looking at right now is about 530k and is 3 bedrooms 2 bathrooms. I then researched how much I could get renting out each room per month, which turned out to be $1,250 per room per month. Keep in mind that the cost of living in it on my own would be somewhere between $3,700 and $4,000 per month with a 20% down payment. That works out to me only paying $1,200 to $1,500 per month to live here in SoCal. That excludes, write offs, paying off the loan, having a HELOC to invest in other properties, and being able to avoid rising rents at the same time (For example, anywhere between $2,400 and $3,000 per month for a 2 bedroom apartment). Overall, I think house hacking this condo is possible, what do you guys think?

Orange County, California

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Peter Mckernan
  • Residential Real Estate Agent
  • Irvine, CA
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Peter Mckernan
  • Residential Real Estate Agent
  • Irvine, CA
Replied Jun 11 2022, 05:14

Hey @Samuel Bob this is a great strategy and congrats on taking this leap! The challenge is that the prices are super high as you mentioned. Those numbers are good for renting out rooms, the last I checked the average was about $1,000 a room, however, that was a little while back. 

The goal in house hacking is to put as little down as possible (less than 20%) because you will be living in the home and can use it as a primary. That should be considered here even if it is 15% down. 

I would suggest looking for a SFR, putting a smaller amount down, and then possibly building an ADU eventually on the place. If not, just use the SFR for the first house hack, this means buying something that needs some rehab and fixing it up and getting it rent ready. I think this is a great time due to the shifting market and deals that maybe surfacing soon!

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Replied Jun 11 2022, 09:01
Quote from @Peter Mckernan:

Hey @Samuel Bob this is a great strategy and congrats on taking this leap! The challenge is that the prices are super high as you mentioned. Those numbers are good for renting out rooms, the last I checked the average was about $1,000 a room, however, that was a little while back. 

The goal in house hacking is to put as little down as possible (less than 20%) because you will be living in the home and can use it as a primary. That should be considered here even if it is 15% down. 

I would suggest looking for a SFR, putting a smaller amount down, and then possibly building an ADU eventually on the place. If not, just use the SFR for the first house hack, this means buying something that needs some rehab and fixing it up and getting it rent ready. I think this is a great time due to the shifting market and deals that maybe surfacing soon!

Great idea! Also, do you know whether or not I could use an rv trailer ad an ADU?

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Kushaal Malde
  • Lender
  • Redwood City, CA
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Kushaal Malde
  • Lender
  • Redwood City, CA
Replied Jun 11 2022, 09:26

Hey @Samuel Bob great suggestions already provided by @Peter Mckernan. I got a FTHB client into a 3bed/2bath condo house-hack in Irvine, CA in December. His interest rate was pretty stellar but he also paid $670k with 10% down. With your budget and 20% down, the monthly payments could be similar and work out just as well for you. At the same time, you could explore lower down options so you can compare and contrast to help you make the most informed decision based on what your goals are. I'd be happy to help you explore any scenarios or if you want a 2nd opinion on anything you're looking at, just shoot me a message!

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Jane S.
  • Flipper/Rehabber
  • Colorado Springs, CO
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Jane S.
  • Flipper/Rehabber
  • Colorado Springs, CO
Replied Jun 11 2022, 10:39

Will you be able to get homeowners coverage and don't forget the roommates need renters insurance. Accepting animals is a big risk you might end up having to care for them … just saying… if they ruin room walls and doors

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Robert Reynolds
  • Real Estate Agent
  • Los Angeles, CA
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Robert Reynolds
  • Real Estate Agent
  • Los Angeles, CA
Replied Jun 13 2022, 22:42

@Samuel Bob I definitely think househacking a condo is a great idea.  I just sold one to my friend and he’s renting out the other two bedrooms and living virtually rent free


Robert Reynolds

Real Estate Agent California (#02166235)

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Jon McCarron
  • Real Estate Agent
  • Salem, MA
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Jon McCarron
  • Real Estate Agent
  • Salem, MA
Replied Jun 14 2022, 06:02

Hi @Samuel Bob

I think house hacking is a great idea. As far as choosing the property type, I think the small multi-family is the way to go. By your original post, if you can do 20% of $530k, then you could probably do 5-10% on the 700k small multi-family. You could also have the excess cash as reserves in case you need to do any repairs or fix-ups. If you found a 3 or 4 unit building, then you could rent those out, plus any bedrooms in your owner occupied unit. When house hacking, the property doesn't necessarily need to cash flow, but needs to drastically reduce your overall housing expenses.

If the small multi is out of the question, I would caution that the HOA can raise the monthly condo fee, and it's not always a slight increase. That can throw your numbers off if you aren't prepared or anticipating it when you buy. But, if the condo is where you want to live, maybe that's a trade off you make with yourself.

Hope that helps!

Jon

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Dave Skow
  • Lender
  • Seattle, WA
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Dave Skow
  • Lender
  • Seattle, WA
Replied Jun 14 2022, 20:00

@Samuel Bob--1) check with condo HOA if renting is allowed 2) $11250 without private bath ?