House hack a house or a condo?
Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes
House hack a house or a condo?
Most Popular Reply
Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
3yNormally I'd advise against a condo, but I don't like the thought of waiting. The opportunity costs are just too high. If you do go the condo route, make sure you read the HOA agreement THOROUGHLY and think harder about resale value than you would with a SFH. You'll also want to make sure you can attend the HOA board meetings. Good luck!
27 Replies
- Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes3y
Normally I'd advise against a condo, but I don't like the thought of waiting. The opportunity costs are just too high. If you do go the condo route, make sure you read the HOA agreement THOROUGHLY and think harder about resale value than you would with a SFH. You'll also want to make sure you can attend the HOA board meetings. Good luck!
- Realtor · San Diego, CA · Member since 2020 · 14 posts · 9 votes3y
Quote from @Mary Ainsworth:
Hi all! I recently asked a question if I should house hack (in San Diego) a condo to get started now (I'm 22) OR should I wait until I have enough to buy a house and house hack a house?
I only have 50k saved up now which can get me a condo, but would probably need to wait another 1-2 years to have enough to put a down payment down on a house + have enough reserves
I'm only considering trying to get a house instead and wait because they appreciate more over time and there's more room to add value down the line - I can add an ADU to a house and won't ever be able to do that with a condo...please let me know your thoughts!
Great that you are critically thinking about your options! I would recommend being in the market with a condo in the right location that will have the potential for appreciation and a couple different exit strategies when you are ready to move up to a home. If you wait with your money in a savings account you a risking that money losing power via inflation and still not being able to purchase a home in a couple years.
First step, if you haven't already I would recommend is connect with a local lender and see what your options are given your savings and income. There are many options where you don't have to put down 20% to purchase. 3.5%, 5%, 10% can get the job done!
At the end of the day you have to do what you are most comfortable with for your life plan.
Cheers
- Member since 2022 · 50 posts · 24 votes3y
Quote from @Mary Ainsworth:
Hi all! I recently asked a question if I should house hack (in San Diego) a condo to get started now (I'm 22) OR should I wait until I have enough to buy a house and house hack a house?
I only have 50k saved up now which can get me a condo, but would probably need to wait another 1-2 years to have enough to put a down payment down on a house + have enough reserves
I'm only considering trying to get a house instead and wait because they appreciate more over time and there's more room to add value down the line - I can add an ADU to a house and won't ever be able to do that with a condo...please let me know your thoughts!
There are a lot of regulations with condos, so I advice buying a SFH with more opportunities instead.
If you don't have around 20/30% downpayment for that, start with the condo but make sure that there's no law restricting short-term rentals I that area.
- Member since 2022 · 50 posts · 24 votes3y
Quote from @Mary Ainsworth:
Hi all! I recently asked a question if I should house hack (in San Diego) a condo to get started now (I'm 22) OR should I wait until I have enough to buy a house and house hack a house?
I only have 50k saved up now which can get me a condo, but would probably need to wait another 1-2 years to have enough to put a down payment down on a house + have enough reserves
I'm only considering trying to get a house instead and wait because they appreciate more over time and there's more room to add value down the line - I can add an ADU to a house and won't ever be able to do that with a condo...please let me know your thoughts!
Have you considered other cities?
With the amount you finance a condo in San Diego, you can purchase a SFH in some other cities and states. You could rent a house here in San Diego and buy another some where else as a STR that generates monthly cash flow and pays off the mortgage. You would refinance in a year or two and own more assets over time with the compound interest. - 3yRyan ThomsonBusiness MemberReal Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
@Mary Ainsworth if your condo has the potential to make enough income when you move out that you can cover the rest of the expenses without problem, then I think it may make sense to house hack the condo now. If your exit plan is to sell, I would say that's not a great plan as the longer you hold real estate the greater chance it has gone up in value. Would hate to see you lose value in your condo if you were to sell in two years.
The Assumable Guy544 Reviews - 3yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Condos (and HOAs) will have more regulations and condo fees will cost you more. So while condos have a lower purchase price, factor in the condo fees as well to your price. You can also have condo boards change the rules on rentals.
- Real Estate Agent · Atlanta, GA · Member since 2020 · 414 posts · 233 votes3y
Hey Mary!
First of all, I'm happy to hear you have a solid financial at 22!
I would take into consideration the income you receive from house hacking a condo, and how that will impact your savings. For example, if house hacking a condo will allow you to save an additional 3k / month, you'll have made back that 50k less than a year and a half. In this case, it might be worth house hacking now the condo and waiting an extra 6 months to obtain a house AND condo.
However, if you're only able to save an extra 1k / month house hacking the condo, it might be worth waiting a year to buy a home with some value add.
Either way, you have two good options in front of you.
- Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes3y
Quote from @Ken Maguire:
Quote from @Mary Ainsworth:
Hi all! I recently asked a question if I should house hack (in San Diego) a condo to get started now (I'm 22) OR should I wait until I have enough to buy a house and house hack a house?
I only have 50k saved up now which can get me a condo, but would probably need to wait another 1-2 years to have enough to put a down payment down on a house + have enough reserves
I'm only considering trying to get a house instead and wait because they appreciate more over time and there's more room to add value down the line - I can add an ADU to a house and won't ever be able to do that with a condo...please let me know your thoughts!
Great that you are critically thinking about your options! I would recommend being in the market with a condo in the right location that will have the potential for appreciation and a couple different exit strategies when you are ready to move up to a home. If you wait with your money in a savings account you a risking that money losing power via inflation and still not being able to purchase a home in a couple years.
First step, if you haven't already I would recommend is connect with a local lender and see what your options are given your savings and income. There are many options where you don't have to put down 20% to purchase. 3.5%, 5%, 10% can get the job done!
At the end of the day you have to do what you are most comfortable with for your life plan.
Cheers
Thanks for the advice! I am only putting done 3-5% so I'm thinking a condo might be a good move considering the inflation you mentioned - better than it just sitting there!
- Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes3y
Quote from @Nicole Heasley Beitenman:
Normally I'd advise against a condo, but I don't like the thought of waiting. The opportunity costs are just too high. If you do go the condo route, make sure you read the HOA agreement THOROUGHLY and think harder about resale value than you would with a SFH. You'll also want to make sure you can attend the HOA board meetings. Good luck!
Thanks for your advice! I've factored in the HOA cost but that's a great point to read the details - will do!
- Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes3y
Quote from @Nazanin Boojar:
Quote from @Mary Ainsworth:
Hi all! I recently asked a question if I should house hack (in San Diego) a condo to get started now (I'm 22) OR should I wait until I have enough to buy a house and house hack a house?
I only have 50k saved up now which can get me a condo, but would probably need to wait another 1-2 years to have enough to put a down payment down on a house + have enough reserves
I'm only considering trying to get a house instead and wait because they appreciate more over time and there's more room to add value down the line - I can add an ADU to a house and won't ever be able to do that with a condo...please let me know your thoughts!
Have you considered other cities?
With the amount you finance a condo in San Diego, you can purchase a SFH in some other cities and states. You could rent a house here in San Diego and buy another some where else as a STR that generates monthly cash flow and pays off the mortgage. You would refinance in a year or two and own more assets over time with the compound interest.I have thought about of state in my last forum post! Investing long distance can be risky though, and normally doesn't appreciate as much as houses, therefore I'm unsure if it would be as good of an investment, do you have any out of state recommendations?
- Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes3y
Quote from @Josh Bowser:
Hey Mary!
First of all, I'm happy to hear you have a solid financial at 22!
I would take into consideration the income you receive from house hacking a condo, and how that will impact your savings. For example, if house hacking a condo will allow you to save an additional 3k / month, you'll have made back that 50k less than a year and a half. In this case, it might be worth house hacking now the condo and waiting an extra 6 months to obtain a house AND condo.
However, if you're only able to save an extra 1k / month house hacking the condo, it might be worth waiting a year to buy a home with some value add.
Either way, you have two good options in front of you.
Thanks for the advice! That's a great way to look at it. I'd only save probably 1k or so a month at the moment, so I'm thinking might be best to wait - either that or get a condo and 1031 in 2 years into a house
- 3yKonstantin GinzburgPro MemberMember since 2021 · 376 posts · 242 votes
Quote from @Mary Ainsworth:
Hi all! I recently asked a question if I should house hack (in San Diego) a condo to get started now (I'm 22) OR should I wait until I have enough to buy a house and house hack a house?
I only have 50k saved up now which can get me a condo, but would probably need to wait another 1-2 years to have enough to put a down payment down on a house + have enough reserves
I'm only considering trying to get a house instead and wait because they appreciate more over time and there's more room to add value down the line - I can add an ADU to a house and won't ever be able to do that with a condo...please let me know your thoughts!
My advice would be to aim for a house to house-hack rather than a condo, even if it means you need to wait another year or two to do. There are a few downsides to investing in a condo with the primary ones being HOA fees and regulations. HOA fees tend to consistently increase each year which means that this will be anther expense that needs to be considered that will affect your long-term rate of return. The condo HOA can also dictate the terms of any lease you sign with a tenant and these rules can be changed at any time. I have heard of condos banning STR rentals already. While not as common, I have heard of the occasional (although rare) instance of a condo banning rental units in general in order to prevent a "transient feel" in the condo. As you have said, price appreciation is also higher with a home compared with a condo.
My best advice would be to try to find a multi-family property to house-hack if they are available in our area rather than a single family home. House hacking a single family home is an option but rent for a single bedroom typically going to be less than for a fully independent unit. Since the units are separate, you will also be able to maintain your privacy and create a clear separation between you and your tenants that is harder to do when houses hacking a single family home. This way, it will be simpler to maintain both a personal quality of life as well an initial step into real estate investing as a business/investment venture.
- Real Estate Agent · WA · Member since 2021 · 254 posts · 173 votes3y
When buying a condo consider that it's overall year-over-year appreciation is half that of a Single Family Home (on average). I would wait till you can buy a Single Family Home or even partner up with a family member or friend (that you trust!) to syndicate one out.
- 3yAlan AsriantsBusiness MemberReal Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
For me this would be slight dilemma. On the one hand I don't like the idea of waiting too long and on the other hand I don't like condos lol. I understand that your market might be very tough to find a SFH or Multi with that down payment. I know plenty of people who invest in condos and do just fine. Like someone said here: do your due diligence and make sure rental are allowed in the association.
Alan Asriants - New Century Real Estate 590 Reviews - Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes3y
Quote from @Joy Allen:
@Mary Ainsworth definitely do a house hack! Get an FHA loan and put less down. I have three condominiums and the HOA is always a challenge. Maybe I have just had bad luck but I'll take a house over condo any day!
thanks for your input! I've learned from some people on here that I definitely need to thoroughly read through an HOA agreement before I commit to any of them, something to definitely keep in mind!
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Mary Ainsworth:
Hi all! I recently asked a question if I should house hack (in San Diego) a condo to get started now (I'm 22) OR should I wait until I have enough to buy a house and house hack a house?
I only have 50k saved up now which can get me a condo, but would probably need to wait another 1-2 years to have enough to put a down payment down on a house + have enough reserves
I'm only considering trying to get a house instead and wait because they appreciate more over time and there's more room to add value down the line - I can add an ADU to a house and won't ever be able to do that with a condo...please let me know your thoughts!
house --many HOA doesn't accept sublet ; also condo usually only have one single entry point, house could have multiple entry to enter home so bit privacy is there.
- Rental Property Investor · Lubbock, TX · Member since 2021 · 58 posts · 21 votes3y
Mary,
I would run a thorough analysis of the condo before house hacking with one. In my experience with Condo's there are lots of hidden HOA rules/fees that you could miss if you don't read through the agreement thoroughly. Typically, condo's are not as good of investments due to those reasons. But if you have run the numbers, read through all the details, and it is still a good deal, then go for it!
- Lender · Seattle, WA · Member since 2022 · 482 posts · 768 votes3y
HI Mary, it really depends on what your long term goal on investing real estate. You want to invest just to have a place to live and potentially offsetting your mortgage payment by renting out the vacated rooms or having x amount of cashflow in the future? Looking into single family houses or multifamily, as there is an actual land that you own and potentially build ADU/DADU in the foreseeable future. However, if you build the ADU and not condomise it, they appraisal will only view it as a SFR and give you the rent as SFR at 75% if lease agreements is being used. If you want to maximize your max rents then if might be a good idea to condomise it so that you can get rents as two separate units.
Also, the beauty of FHA is that it allows you to put 3.5% down payment to invest in 1-4 units. However if you plan on buying 3-4units, there is a trigger rule for FHA, it is called the self sufficiency test. In order to past this SS test, your appraised market gross rental income at 75% has to be more/equal to your monthly mortgage payment (PITIA). These are something to be considered. Feel free to DM and we can talk more about it @Carlos Valencia @Albert Bui - Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes3y
You can house hack a condo but the HOA fee definitely will make it harder to cash flow when you end up renting it out after you leave. Condos aren't a no, but I would say that houses are certainly preferable.
- Real Estate Broker · San Diego, CA · Member since 2016 · 355 posts · 195 votes3y
Hi @Mary Ainsworth, I'm a local broker here in SD, I have help many househacker here. I have some clients are now looking for their 3rd Househack in 4 years. Some of them starting with a condo, then progress up. For you first one, I wouldn't over complicate it. Speak with a broker, find out what your max loan amount is. Based on that loan amount, what areas would you like to live, I will assume where you want to live within your budget, will also be your ideal tenants/roommates. Getting started you will learn so much more faster than waiting. The longer you wait, the more likelihood prices continues to go up. SD supply cannot keep up with the demand. If you want more help being pointed in the right direction reach out anytime.
- Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes3y
Quote from @Brady Ferguson:
Mary,
I would run a thorough analysis of the condo before house hacking with one. In my experience with Condo's there are lots of hidden HOA rules/fees that you could miss if you don't read through the agreement thoroughly. Typically, condo's are not as good of investments due to those reasons. But if you have run the numbers, read through all the details, and it is still a good deal, then go for it!
thanks for the advice! I'll be sure to read through everything if I do decide to go that way
- Lender · San Diego, CA · Member since 2022 · 235 posts · 94 votes3y
Quote from @Kenneth Donaghy:
Hi @Mary Ainsworth, I'm a local broker here in SD, I have help many househacker here. I have some clients are now looking for their 3rd Househack in 4 years. Some of them starting with a condo, then progress up. For you first one, I wouldn't over complicate it. Speak with a broker, find out what your max loan amount is. Based on that loan amount, what areas would you like to live, I will assume where you want to live within your budget, will also be your ideal tenants/roommates. Getting started you will learn so much more faster than waiting. The longer you wait, the more likelihood prices continues to go up. SD supply cannot keep up with the demand. If you want more help being pointed in the right direction reach out anytime.
Thanks Kenneth for the insight! That's what I'm thinking too - waiting could just make it more unattainable to get in later so I want to avoid that.
- Lender · Seattle, WA · Member since 2022 · 482 posts · 768 votes3y
HI Mary, I would recommend looking into single family houses or multifamily, as there is an actual land that you own and potentially build ADU/DADU in the foreseeable future. Also, the beauty of FHA is that it allows you to put 3.5% down payment to invest in 1-4 units and rates tends to be lower than conventional. However if you plan on buying 3-4units, there is a trigger rule for FHA, it is called the self sufficiency test. In order to past this SS test, your market gross rental income at 75% has to be more/equal to your monthly mortgage payment (PITIA). These are something to be considered. Feel free to DM and we can talk more about it @Carlos Valencia @Albert Bui
As for conventional, there are no specific tests to pass but down payment would require more than fha depending on the unit. Usually 15%-25% down payment for 2-4 units and 5% down payment for single family. Also, the mortgage insurance is slightly lower than FHA private mortgage insurance. - Member since 2018 · 138 posts · 56 votes3y
Not knowing anything about you or what you want.....Get a two or 3 bedroom condo near a hospital, with an HOA that allows you to do MTR (or doesn't specifically excluded it) and rent out your extra rooms to traveling nurses on furnished finder. You will need to fix the place up to be nice and will need to furnish it a bit higher end that you might otherwise. Do that for a few years while you save for you next deposit.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.