House hacking with new construction 4 plex?

Question

Hello everyone,

I have been doing research about starting house hacking this year, I have been looking at properties to start  with at FHA loan in the TX RGV area, starting with a fourplex.

My BIG question here is, would you think it is riskier to start with a brand new fourplex having a bigger monthly pay at the end of the month but; on the other side thinking on not having to get as many repairs as an older building ex. 5 years older. The difference of a new building ranges:

New fourplex building: around 450k-500k

Older fourplex buildings: 375k

Any thoughts or tips?, The reason I am inclining to start the house hacking with a brand new fourplex is that of course feels more convenient but I am not sure if it is most profitable.

Any info is appreciate it, thanks in advance.

Jaron Walling · Answer

@Hiram Orozco Lopez Buy the older fourplex building for $325K.

Then add value by fixing it up - unit by unit, all while living there. If the new build market values are $450K that's a big spread. This gives you options. You could refinance out of the FHA, remove PMI (if you have any), cash-flow, break even as a house-hack, or sell. That's the biggest goal for house-hacking. Nobody got rich off house-hacking. It's a foundation to grow a portfolio and cut living expenses.

Keith Robinson · Answer

Lots of good advice already the only thing I would add is this: if you're looking to house hack and you've got to live there I would make that a factor in the decision making.  If you like the area/neighborhood/location for your personal living space I'd, for sure, make that part of your overall evaluative process.

Rick Albert · Answer

Just because a property is older build date doesn't mean it is in bad shape. For example, if a "used" property has a new roof, new sewer line, etc. it could be on the same level as the new construction, only less expensive.

The concept of "adding value" is intriguing (both my house hacks were value adds) but you have to factor in your time, carrying costs, and the money it would take to renovate. If you factor it in, then go for the older build.

You also need to see what the rents are. You can see if there is a premium for new construction. Chances are is that it isn't.

I would play devil's advocate and say there are advantages to new construction. Not only are your systems brand new, but some builders come with a long time warranty and in theory the property is already in the most modern condition that most buyers and tenants would want. That saves a lot of the guesswork out of it for you. You could literally start renting right away with no additional funds out of pocket.

Bill B. · Answer

How old are the old/existing properties? Do they have lead paint or asbestos? Cast iron pipes that are about to fail? 4 x  ac units, a new roof  and 4 water heaters could just about eat up all that price difference. In most markets new is $100-200k more, not $75-$125k.

The newer properties are PROBABLY in nicer/newer neighborhoods. The rents should be higher, the utilities lower. You could easily sink $75k in to interior updates and be stuck with a building that looks old surround by old buildings that cost you just as much as new.

Ryan Thomson · Answer

@Hiram Orozco Lopez you have to think about what your goals are with house hacking and what your financial situation allows for. Are you trying to get more cashflow? Are you trying to add value to a property? Do you have the money (or access) to fix up a property? Do you want to spend time fixing up a property if it means a better return?

I think once you answer those questions and run the NUMBERS you will have a clearer answer. I have an awesome spreadsheet if you want to compare the two properties.

Sebastian Valdez · Answer

Hello Hiram, I am from Edinburg and I am in the same situation as you, I am also in the RGV market and have been looking for small multifamily to buy as my first house hack with an FHA loan as well. would you like to connect?

Joseph Mulero · Answer

Hey brother , I am in your market.  I am buying new in a developing area in mission right next to highway.  Let’s connect and chat over the phone.

Zach Trayner · Answer

One thing I'd keep in mind as you consider new vs. old in the valley is that people here in the valley are willing to pay a premium for a new thing. I've seen new 4plexes have to lower rents after year 1, for example. I agree with other opinions here that an older (but not rehab-worthy) 4plex would be your best bet. Just make sure you have some cash ready to go for any issues that may arise.

Eliott Elias · Answer

In this market, you need to buy resale property and negotiate ass much as possible.

House hacking with new construction 4 plex?

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