Key Points

• -Duplex- FHA=3.5% down. Conventional= 15% down minimum
• -3-4 Units- Must be FHA and pass the self-sufficiency test
• -VA Loan- Zero down for 1-4 units!

Action

• -Connect with an investor friendly lender asap if you are considering house hacking a multifamily to see what your options are. Happy to provide some referrals I would closely with!

Hello BP Community! I spend a good chunk of time in the BP forums, not only learning but also providing as much insight and value as I can. One of the most common house hacking topics I come across is house hacking a multifamily property. In theory, it is an excellent strategy because you are able to maintain your privacy while someone helps pay down your mortgage and decrease your living expenses. Plus you are purchasing a future rental for "low" money down.

Sounds great, right? However,  where I see more investors get stuck is the financing. Since this is a multifamily property and you are purchasing it as your primary residence, financing can get complicated.

So here is a brief breakdown of primary financing for small multifamily properties (2-4 units).

(I will cover VA Loans at the end of the post)

Duplex House Hacking- FHA will be your best bet as you can still invest with just a 3.5% down payment. If you do not have access to an FHA loan, you will have to go with a conventional loan, which requires a minimum of 15% down payment even if it is your primary residence.

In the Denver Metro Market, less than 10% of our house hacking clients purchase duplexes.

Triplex and Fourplex House Hacking- This is even more challenging! If you are planning to owner-occupy, your only option is an FHA loan. However, the home must pass the self-sufficiency test. This means that 75% of gross rents must cover 100% of the mortgage (principal, interest, taxes, and insurance).

Here’s a simple example:

Mortgage = $4,000/month

Unit 1 = $1,000/month

Unit 2 = $1,000/month

Unit 3 = $1,000/month

Unit 4 = $1,000/month

Total Rents = $4,000/month

$4,000 x 75% = $3,000

This example fails the test by $1,000/month. To pass, you must put down a higher down payment amount until your monthly mortgage is less than $3,000/month. In order to do this, you could be out of pocket +$150k.

The Ultimate Loan for Multifamily House Hacking- If you want to house hack a multifamily property, a VA Loan is the way to go! By qualifying for this loan program, you can purchase a duplex, triplex, or fourplex with no down payment, which means an infinite return on your investment. To all active duty military and veterans, thank you for your service!