Seeking Advice: Finding Multifamily Property for House Hacking in Houston

[Zac Hugh Nguyen]

Hey BiggerPockets community,

I hope you're all doing well. I'm excited to jump into the world of real estate investing and I'm particularly interested in house-hacking a multifamily property in the city of Houston. I'd love to hear your insights and advice on the process. Here's what I'm thinking:

Background: I'm currently researching neighborhoods in Houston and exploring my financing options. My goal is to live in one unit and rent out the others to offset my living expenses. It seems like a fantastic way to dip my toes into real estate while building equity and potentially generating passive income.

Here's Where I Could Use Some Expertise:

1. Neighborhoods: Are there any neighborhoods in Houston that you would recommend for a house hacking strategy? I'm looking for areas with strong rental demand and potential for future growth.
2. Property Search: What resources, online platforms, or local contacts have you found most useful for finding multifamily properties that fit the house hacking model?
3. Market Analysis: How can I best analyze the Houston market to identify properties with good potential for appreciation? What key indicators should I be keeping an eye on?
4. Financing: Do you have any recommendations for financing options for a first-time investor pursuing a house hacking strategy? I've heard about FHA and VA loans – any thoughts?
5. Property Management: I'll be living in one of the units, but I'm still curious about property management. Should I consider hiring a property management company from the start, or is it manageable to handle everything myself?
6. Due Diligence: What are some important factors to consider during due diligence for a multifamily property? Any red flags I should watch out for?
7. Lessons Learned: For those who have successfully house-hacked a multifamily property in Houston or a similar market, what were some of the most valuable lessons you learned along the way?
8. Local Networking: Are there any local real estate meetups, events, or organizations in Houston that you'd recommend for networking and gaining more insights into the market?
9. Tips for Negotiation: When it comes to making offers and negotiating, what strategies have you found effective in securing a good deal on a multifamily property?

I truly appreciate any advice, tips, or personal experiences you can share. I'm eager to learn from the collective wisdom of this community and make informed decisions as I embark on this exciting journey.

Thanks so much in advance for taking the time to help out!

[Abel Curiel]

Quote from @Zac Hugh Nguyen:

Hey BiggerPockets community,

I hope you're all doing well. I'm excited to jump into the world of real estate investing and I'm particularly interested in house-hacking a multifamily property in the city of Houston. I'd love to hear your insights and advice on the process. Here's what I'm thinking:

Background: I'm currently researching neighborhoods in Houston and exploring my financing options. My goal is to live in one unit and rent out the others to offset my living expenses. It seems like a fantastic way to dip my toes into real estate while building equity and potentially generating passive income.

Here's Where I Could Use Some Expertise:

1. Neighborhoods: Are there any neighborhoods in Houston that you would recommend for a house hacking strategy? I'm looking for areas with strong rental demand and potential for future growth.
2. Property Search: What resources, online platforms, or local contacts have you found most useful for finding multifamily properties that fit the house hacking model?
3. Market Analysis: How can I best analyze the Houston market to identify properties with good potential for appreciation? What key indicators should I be keeping an eye on?
4. Financing: Do you have any recommendations for financing options for a first-time investor pursuing a house hacking strategy? I've heard about FHA and VA loans – any thoughts?
5. Property Management: I'll be living in one of the units, but I'm still curious about property management. Should I consider hiring a property management company from the start, or is it manageable to handle everything myself?
6. Due Diligence: What are some important factors to consider during due diligence for a multifamily property? Any red flags I should watch out for?
7. Lessons Learned: For those who have successfully house-hacked a multifamily property in Houston or a similar market, what were some of the most valuable lessons you learned along the way?
8. Local Networking: Are there any local real estate meetups, events, or organizations in Houston that you'd recommend for networking and gaining more insights into the market?
9. Tips for Negotiation: When it comes to making offers and negotiating, what strategies have you found effective in securing a good deal on a multifamily property?

I truly appreciate any advice, tips, or personal experiences you can share. I'm eager to learn from the collective wisdom of this community and make informed decisions as I embark on this exciting journey.

Thanks so much in advance for taking the time to help out!

 Hey Zac! Great way to get started in RE investing. Househacking is a solid strategy which will give you acquisition, project management and property management experience. Soak it up, build systems and use your experience to expand your portfolio over time!

1. I'm not located in Houston but I recommend you use BP's Find an Agent tool to speak with local experts and pick their brain on the local market. 

2. When choosing the right local agent, be sure that they not only know the local market and have experience but just as important... they should already have a local network of Realtors, Investors, Wholesalers and a database of potential sellers.
All Realtors have access to the local MLS which feeds property information to most of the 3rd party sites you'll have access to i.e. Zillow, Realtor.com, Redfin, etc. Your best deals will come from these sources.
The only source that is better is for you to go direct to seller via cold calls, door knocking, mail campaigns, etc. This is a full-time job and is not necessary if you select the right investor-friendly Realtor who is already doing all of these things for you

3. Use the BP calculators OR this Househack Calculator to run analyses on properties of interest. Key indicators to look for are properties that allow you to pay LESS for your househack unit that you would pay if you were renting a similar apartment. This is not feasible in every market and may depend on your down payment amount.
I would also use conservative rent growth and annual appreciation growth projections when running your analysis. For example: Although rents and property values may have increased 5-10% YoY respectively, you may want to use a 3 or 4% annual increase for your calculations.

4. If you're a veteran, VA is an awesome product to use. FHA as well since you can get in with as little as 3.5% down. Your lender can share more details and your Realtor will let you know if these loan options pose a problem in the current market. For example, some local markets here in NY are highly competitive and properties often go to purchasers putting down 20+%.

5. I don't recommend hiring a PM for your first deal. Learn the ropes yourself and use tech platforms like hemlane (if needed) to take on some of the admin tasks i.e. rent collection, maintenance requests, etc. Once you have some systems in place and acquire more units, your experience will make it easier for you to self-manage in the future or hire a PM company you feel comfortable in.

6. A home inspection will help you identify red flags regarding the property's foundation, mechanical systems/utilities, roof, and overall condition. A title report will help you in the due diligence phase to identify any issues from the past or potential future issues i.e. the heir of the previous owner claiming rightful ownership to the property during or after your purchase.

7. I househacked in a competitive market back in 2010 and the biggest lesson learned was that you should build the right team from day 1. For me, that would've meant finding a good lender, Realtor and attorney. I did neither! haha
I recommend taking your time to vet and select the right professionals who understand your goals as well as (if not better than) you.

8. Check out the BP Events page, eventbrite.com, meetup.com, facebook, linkedIn and anywhere else you can find a local meetup.

9. Have all of your ducks in a row - pre-approval letter, proof of funds, acquisition team (agent, atty/title company, lender, inspector, etc.). In a seller's market, you'll need to separate yourself from the competition and show you're able to close quickly. Your realtor should be able to help with the comps and necessary information needed to effectively negotiate the deal.

All the best to you on your journey!

Abel

[Nick Bufalino]

Thanks for the post, Zac, and appreciate the thorough response, Abel. I'm in a similar position (RE: seeking to house hack a multifamily property in Houston -- first time real estate investor here), and think you asked all the right questions. Best of luck with your house hack, Zac, and would love to connect.

[Nicholas Ruscio]

Hello,

Congratulations on your decision to dive into the world of real estate investing and pursue a house hacking strategy in Houston. Here are some answers to your questions below. Please feel free to reach out if you would like to chat further. I am very diverse with financing and flood insurance and can provide some further insight. 

Neighborhoods: For house hacking in Houston, consider neighborhoods like Midtown, Montrose, the Heights, and the Museum District. These areas have strong rental demand, proximity to amenities, and potential for future growth due to urban development.

Property Search: Online platforms like Zillow, Redfin, and LoopNet are great for searching multifamily properties. Networking with local real estate agents who specialize in investment properties can also provide valuable insights and off-market opportunities.

Market Analysis: Keep an eye on factors like job growth, population trends, infrastructure development, and economic diversification. Areas with expanding industries and urban revitalization tend to have good appreciation potential.

Financing: FHA and VA loans are excellent options for first-time investors. They typically offer lower down payments and competitive interest rates. Reach out to mortgage brokers / lenders to explore your best financing options.

Property Management: Handling property management yourself while living on-site is manageable, especially for a small multifamily property. As you grow, you might consider outsourcing to a property management company if the workload becomes challenging.

Due Diligence: During due diligence, scrutinize the property's financials, condition, and rental history. Look for any maintenance issues, legal disputes, or deferred maintenance that could impact your investment.

Lessons Learned: Make sure to do tenant screening, setting clear rental policies, and have a contingency fund for unexpected expenses.

Local Networking: Explore local meetups like the Houston Real Estate Networking Club and the Real Estate Investors of Houston (REIoH). Attending these events can help you connect with experienced investors and gain insights into the local market.

Tips for Negotiation: When negotiating, be prepared to walk away if the deal doesn't align with your financial goals. Research comparable properties, understand the seller's motivations, and be open to creative financing solutions.

Thanks, 

[Jerry Ta]

Hi Zach,

I wanted to see if based on your search if you have found something you would consider at the moment from a property standpoint.

I don't know anyone personally do househacking from multi-units, but do know quite a few owning a singular property inside the loop and do mid-term rentals, mostly 3 story town homes with the bottom bedroom unit rented out. 

[Jay Thomas]

Sure thing! Houston's Heights, Montrose, and Midtown neighborhoods are hotspots for house hacking. Use platforms like Zillow and Realtor.com to find properties, and keep an eye on job growth, population trends, and infrastructure development for potential appreciation. FHA and VA loans are great for beginners. If you're hands-on, manage the property yourself; otherwise, consider a property manager. Prioritize due diligence, especially property condition and rental history. Patience is key, and networking through meetups like the Houston Real Estate Networking Club and Bigger Pockets helps. Lastly, negotiate confidently, armed with market knowledge. Good luck on your exciting journey into Houston's real estate!

[Ron Dancy]

@Jay Thomas Also, to add to your point...Have the funds ready! Nothing like finding a good deal and you can pull your funds together fast enough #LearnLesson

[Alyssa Holbrook]

2. Costar is the best for finding multifamily properties, though CREXI is free and also great. Also, Loopnet has some multifamily properties. As far as the property itself being good for house hacking you'll want to look at your returns. 

6. Due Diligence -
Ask for the leases and rent rolls for the property. 

Create a plan for how you will increase the income and decrease the expenses. 

House hacking - I would recommend putting 5% down on a conventional loan (rather than 3.5% on an FHA loan) if you have the cash because the mortgage insurance can fall off once you're at 20% LTV. Most of the time you need to call the bank and request for the mortgage insurance to be removed (and often an appraisal is needed to do so).

What are your next 5 action steps that will move you from learning/analysis to purchasing?