Midwest Househacking Advice

15 Replies

Someone who is looking to FIRE and know that the best way to make a huge advancement is by house hacking. My question is this. I live in the Lincoln Nebraska area and want to know.

Is it better to go for something like a triplex or 4-plex or go more for say a SFH with 4-5 bedrooms 3 baths and rent out the rooms? I would think in terms of cash flow and life after house hacking the 4 plex would be better but am unsure. Would love to get opinions and the pros and cons of each.

@Jacob Skeen

Cash flow, solid structure and I needed a two bedroom unit, so that was on the list too. My other three units are all one beds.

I bought the place nearly five years ago. It’s a conversion with some of the old woodwork still in place. I made updates to my kitchen and bath, but the other units had already been updated. It’s been a great way to learn landlording.

Lisa

I'm in Minneapolis. I started House Hacking a single-family home and it completely set me financially free. It was 4 Bedrooms so I cash flowed $700 a month while I lived there. I recently bought a tri-plex and moved into it. I don't cash flow well, but I have my own unit and it covers just over my mortgage. My suggestion is to run the numbers first, but if you don't mind living with people, my guess is if you find a big house and rent by room it will cash flow better.

I'm in Minneapolis. I started House Hacking a single-family home and it completely set me financially free. It was 4 Bedrooms so I cash flowed $700 a month while I lived there. I recently bought a tri-plex and moved into it. I don't cash flow well, but I have my own unit and it covers just over my mortgage. My suggestion is to run the numbers first, but if you don't mind living with people, my guess is if you find a big house and rent by room it will cash flow better.

Both bedroom rental or multifamily house hack works. Depends on your comfort level with living with others/ management, the numbers, if your market supports room rentals, ... 

After moving out it is easier to rent by unit instead of rooms because of management but it's totally doable.

With single family, you have first time home buyer conventional loan option which is 3% DP.... more competitive than FHA 3.5% DP.

Like anything there's pros and cons. I'm just mentioning things that come to mind.

@Jacob Skeen congrats on setting your path toward FIRE, that’s great!

As many others have said, it depends a lot on your comfortability level. We (husband+I) knew we wanted to house hack for our first home but we also wanted our own unit so we aren’t sharing space with strangers. We also went with a duplex over 3+ MFH for a few reasons.

1. As far as MFHs go, there are significantly more duplexes available in our market (Twin Cities MN) so it was easier to find more than one deal that would have worked for us. (We had to make multiple offers before getting one accepted due to competition)

2. Even when only putting 3-5% down, it was a lot easier to save a down payment for a duplex than triplex or more.

3. We only have one unit other than our own to rent out, maintain, and set aside expenses like cap ex. We didn’t want to be overwhelmed with our first house hack. (Example: when we first bought the place, both water heaters and a furnace went out within the first few months. I can’t imagine if we’d had four units instead of two.)

All expenses considered, we don’t really cash flow while living here, but the other unit does cover a little more than our mortgage. When we move out we expect to cash flow close to $1,000/month for the whole property. Our plan is to continue house hacking duplexes (about 1 per year) for the next several years. So each time we buy a new duplex, we’re looking for something that will cash flow well when we eventually move out and might need some minor renovation while we live there. Another benefit is that only adding two units at a time feels reasonable for us to continue managing our own rental properties without being overwhelmed since we both work full time jobs.

We’ll be slowly increasing our rental portfolio while keeping our housing expenses virtually none existent.

Good luck! And keep in mind, doing SOMETHING is the best way to get started. Don’t let analysis paralysis get in the way!

Originally posted by @Jacob Skeen :

@Kyle Johnson for SFH house hack do you still have people sign a lease to kind of protect yourself?

 Yes. I used a pretty standard lease I found online. Very similar to a lease I would make someone sign for renting out the whole place. 

@Jacob Skeen my husband started out house hacking a duplex and says it gave him his start. No matter which route you take the sooner you start the better. If an investor starts with a townhouse, sfh, duplex, or a four-plex, as long as you get in the game and don’t sit on the sidelines waiting for a perfect deal you will be fine. Each person may be better suited for a different approach.

@Jacob Skeen I think it’s about what’s best for you. I started house hacking with a SF and rented out rooms. I had a fixer that I worked on and added value as we went. I was 23 when I started and had lots of friends that could fill bedrooms. We had a lot of fun and it gave me the financial ability to pay down a lot of debt and get a good head start in life! I wouldn’t have changed it for the world! If you’d rather not rent to friends etc I think a small multi is a better fit. I turned mine over after 4 years and did other deals with the money.

@Jacob Skeen to echo the above points, I think the answer is where do you lie on the comfortability scale? If you have great friends you're close with an can I've around, you might consider the SFH, though make sure the numbers work out considering the scenario you'll find yourself in after you move out.. managing a "rooming house" is unpleasant. If you'd like a more traditional experience buy and holding a small multi, I'd suggest 1-4 units. Personally I don't think I could do the rent by room option, I could barely live in my 4 plex I house hacked and happy I did it but probably wouldn't want to do it again.. but thats just me, kinda paranoid, I'd cringe thinking something was broken each time I heard the floor creak haha.

Both can work.  
SFH seems a bit more accessible for most people, but go with whatever you find available and have the funds and time for!

Chances are you'll start with one and find yourself doing the other in a few years (or months), so don't stress about which, just use it to get started! ;)