Finding the right househack

[Nicholas Jackson]

Hello everyone,

I was wondering if anyone had any advice on house hacking and finding the best property that would fit my criteria. I am based in St. Louis and recently have been approved for a loan. I am looking to house hack a multifamily unit as the value of my loan relies on income that the property brings in. In my area I am finding that many multi family units are not in the most desirable places or are well above my price range. My question is should I be patient and wait for more opportunities to hit the MLS, look for off market properties in my desired areas and see if anyone would be willing to sell, or try to negotiate deals to a price that is more affordable to me from properties that are listed on the MLS but out of my price range. Thanks for any and all advice!

[Caleb Brown]

Have you connected with a local agent that specializes with investors? Not super familiar with STL but they'll get you on track. In my experience finding multi family house hack is hard and takes a little. Off market deals will open up things. You could be open to a single family too. You could rent out rooms or the basement. An agent on my team did a house hack. They rented the upstairs by room and used the basement as an AirBnB. Another option is doing a live in flip, more of a cosmetic rehab. After you rehab you can use a HELOC or sell it and reinvest. Rinse and repeat, after a few years you'll be in a great spot

[Nicholas Coulter]

@Nicholas Jackson I am with Caleb on this one. I got my first HH with a non investor agent and I was coaching them through what I needed. 

Is the multi family a set strategy for you? Or are you open to rent by the room style?

[Rick Albert]

Deals aren't found, they are made.

You may have to get creative. St. Louis might be like Los Angeles, where a lot of the multifamily properties aren't in the most desirable areas unless you are willing to pay a premium.

You also have to think about your long term goals. Can you make the short term sacrifice in location in exchange for the long term rewards. 

There are other creative options as well. I had clients buy a duplex and convert the dining room into a 3rd bedroom for one of the units. That's how you make a deal work.

[Nicholas Jackson]

Quote from @Nicholas Coulter:

@Nicholas Jackson I am with Caleb on this one. I got my first HH with a non investor agent and I was coaching them through what I needed. 

Is the multi family a set strategy for you? Or are you open to rent by the room style?

 With the loan product I am approved by the amount I am approved for depends on the rent income of the varying property types i.e. I get more money for a 4 family compared to a 2 family and my approval for a single family home would be really low. Based off this I would more likely use multi family for now for this first property. 

[Nicholas Jackson]

Quote from @Rick Albert:

Deals aren't found, they are made.

You may have to get creative. St. Louis might be like Los Angeles, where a lot of the multifamily properties aren't in the most desirable areas unless you are willing to pay a premium.

You also have to think about your long term goals. Can you make the short term sacrifice in location in exchange for the long term rewards. 

There are other creative options as well. I had clients buy a duplex and convert the dining room into a 3rd bedroom for one of the units. That's how you make a deal work.

 I appreciate this advice. It is nice to weigh all my options, see what is possible, and push towards my long term goals as even though this seems like a big deal its only the first step for my investing journey. 

[Wale Lawal]

@Nicholas Jackson

I think you can look into other emerging markets for the multifamily deal that fits in your criteria.

Also you can use value add investment strategy, where multifamily real estate investors will purchase a value add property at a discounted price and later sell the asset in a much better condition. This aspect is similar to 'flipping' in single-family real estate investing!

Here is a blog with detailed information on, Value-Add Investment Strategies https://cepmultifamily.com/val...

All the best!

[Chris Webb]

Hi @Nicholas Jackson. You could drive the area you want to live in and look for a multi-family property, review the tax records and contact the owner directly. This way you can even see if they would be able to offer financing which would not require the income stipulation. Just a thought. Take care. 

[Brian Miller]

@Nicholas Jackson I am an agent/investor in the St. Louis area and help 10-20 house hackers like yourself per year purchasing MFH's and SFH's. My advice is to stick with MFH starting out and look for opportunities within a property that others don't see, or don't want to do. Turning a one bed unit into a two bed, rehabbing a unit, or asking a tenant with low rent to move all fall into that category. Most of the MFH's will be in the city which has it's rough parts, so you want to work with an agent who knows the neighborhoods well, and can honestly tell you whether it would be a good fit for you or not.

Off market properties are fine to look at as well, however most wholesalers want a quick close and sell as is. Your financing, which I assume is FHA, will require a 30-35 day close and can ask that items be fixed prior to closing. Sellers were and still are leery of going with FHA even on the MLS, but they are getting higher prices selling to an owner occupant than an investor so some just deal with it. Hope this helps and let me know if you have any questions about our market. We have a BP meetup in STL that mets up every last Thursday of the month with like minded people and investors!

[Hal Jones]

Hey Nicholas, house hacking is certainly an amazing way to start. Just last week my wife and I sold our first house hack in San Diego, which is a notoriously high priced market. We ran into some of what you are experiencing when we were looking. What I recommend is still looking at those C class neighborhoods you are seeing already, but dial in your criteria to those neighborhoods in the path of progress. Look for the multi that has homes around it starting to be flipped or reno’d but hasn’t quite overtaken the area. You can usually tell which way things are going if you keep and eye out and talk to some investors/agents in your area that know what’s up.  That way you’ll get in before it does, and then benefit from the increase in profits down the road. 

That’s what we did and it really paid off. Good luck, my friend! 

[Nicholas Jackson]

Quote from @Hal Jones:

Hey Nicholas, house hacking is certainly an amazing way to start. Just last week my wife and I sold our first house hack in San Diego, which is a notoriously high priced market. We ran into some of what you are experiencing when we were looking. What I recommend is still looking at those C class neighborhoods you are seeing already, but dial in your criteria to those neighborhoods in the path of progress. Look for the multi that has homes around it starting to be flipped or reno’d but hasn’t quite overtaken the area. You can usually tell which way things are going if you keep and eye out and talk to some investors/agents in your area that know what’s up.  That way you’ll get in before it does, and then benefit from the increase in profits down the road. 

That’s what we did and it really paid off. Good luck, my friend! 

 Thank you for this advice it is really helpful. What were your considerations in terms of safety when looking at these neighborhoods and what were some issues you might have encountered during your time living there? 

[Hal Jones]

Quote from @Nicholas Jackson:

Quote from @Hal Jones:

Hey Nicholas, house hacking is certainly an amazing way to start. Just last week my wife and I sold our first house hack in San Diego, which is a notoriously high priced market. We ran into some of what you are experiencing when we were looking. What I recommend is still looking at those C class neighborhoods you are seeing already, but dial in your criteria to those neighborhoods in the path of progress. Look for the multi that has homes around it starting to be flipped or reno’d but hasn’t quite overtaken the area. You can usually tell which way things are going if you keep and eye out and talk to some investors/agents in your area that know what’s up.  That way you’ll get in before it does, and then benefit from the increase in profits down the road. 

That’s what we did and it really paid off. Good luck, my friend! 

 Thank you for this advice it is really helpful. What were your considerations in terms of safety when looking at these neighborhoods and what were some issues you might have encountered during your time living there? 

 Personally, whatever makes you feel comfortable. Visit during the day and also at night. I'd check it out during the week and the weekend, then you can have a decent feel for it. There are also crime maps and sex offender locations that you can look to see in the area if you feel you need more data.

Never really encountered much issues personally. Multifamily living tends to be louder, imo, with more parties and people out making noise/playing music etc. I think we've heard a gunshot here and there, but never any issues with us in our units. Just feel it out or talk to locals.

[Twana Rasoul]

@Nicholas Jackson The important thing here is that you get started...the first step is the most difficult but certainly worthwhile.  House hacking is the best way to get started and there always will be some sort of sacrifice on property type, location, condition, etc...can't have it all, especially for the first property.  I initially purchased in areas I could afford locally in San Diego to get in the game.  Find a local agent in your market that has lots of experience with multifamily to help you.  Looking off market sounds good but it doesn't always mean that is where the deals are or if those properties are right for you, especially if they need lots of work.  I don't recommend newer investors start off purchasing properties that need a lot of work.

[Hal Jones]

Quote from @Twana Rasoul:

@Nicholas Jackson The important thing here is that you get started...the first step is the most difficult but certainly worthwhile.  House hacking is the best way to get started and there always will be some sort of sacrifice on property type, location, condition, etc...can't have it all, especially for the first property.  I initially purchased in areas I could afford locally in San Diego to get in the game.  Find a local agent in your market that has lots of experience with multifamily to help you.  Looking off market sounds good but it doesn't always mean that is where the deals are or if those properties are right for you, especially if they need lots of work.  I don't recommend newer investors start off purchasing properties that need a lot of work.

Twana, I couldn’t agree more. This is great advice. My househack was also in SD so having to find an entry point in an expensive market just takes some work.