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Caio Ferreira Torres
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House Hacking Every Year Not Possible?

Caio Ferreira Torres
Pro Member
  • New to Real Estate
  • Danbury, CT
Posted Nov 22 2023, 13:41

Hello all, 

I've watched a few podcasts where it was stated that it would be smart to house hack every year to take advantage of the low down payment loan options. With the new Fannie Mae 5% down payment conventional option on multi-family properties, I figured it might be possible to follow through with this strategy. However, I own a duplex and the DTI ratio for the next one just doesn't work out. If I'm struggling to meet the DTI criteria on my second property, how could this strategy be used on a year to year basis?

Here's a summary of my situation as an example: 

The unit I currently live in would rent for $2200

My second unit is currently rented for $2700

I rent my garages out for $350

For the next duplex I would live in one unit & rent the other for $2200 

I currently get paid $80k a year or $6667 per month.

75% (2200+2700+2200) + 350 + 6667 = $12342 per month in income

My current mortgage is 2950, my next would be 3300, and my student loan is 250 = $6500 total debt.

6500/12342 = 52.7% DTI

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Andrew Postell
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Andrew Postell
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Replied Nov 22 2023, 19:26

@Caio Ferreira Torres you mean a podcast/youtube video/ticktok wasn't accurate?  I'm shocked!  Hopefully sarcasm comes through in type.  But yes, just because someone says you can do it...doesn't mean it is actually possible.  That's a hard lesson for a lot of new investors.  But also, you still have to qualify for a new loan to make ANY strategy work. If you lost your job, or your credit changed, then you could not do this or other strategies. Same if you are maxed out with your DTI currently, you can't take on more debt and qualify for a personal home.

Now, keep in mind that interest rates are higher to slow down the economy.  That's by design.  So, also yes, affordability is a real issue for a lot of people.  It's estimated that if rates fell to 6.5% then it would open up home ownership for 1,000,000 people.  Hard to say where rates will go for sure, but we don't expect them to be at this level for longer.  

I would guess that in the future you would qualify.

Also, your math is a bit off above but I wouldn't really worry about it.  Just keep checking in with your lender on where things are.  If you purchase a home every OTHER year, you're going to be a millionaire.  Keep staying diligent with your finances and you will be fine.

Hope all this makes sense.

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Caio Ferreira Torres
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  • New to Real Estate
  • Danbury, CT
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Caio Ferreira Torres
Pro Member
  • New to Real Estate
  • Danbury, CT
Replied Nov 22 2023, 20:32
Quote from @Andrew Postell:

@Caio Ferreira Torres you mean a podcast/youtube video/ticktok wasn't accurate?  I'm shocked!  Hopefully sarcasm comes through in type.  But yes, just because someone says you can do it...doesn't mean it is actually possible.  That's a hard lesson for a lot of new investors.  But also, you still have to qualify for a new loan to make ANY strategy work. If you lost your job, or your credit changed, then you could not do this or other strategies. Same if you are maxed out with your DTI currently, you can't take on more debt and qualify for a personal home.

Now, keep in mind that interest rates are higher to slow down the economy.  That's by design.  So, also yes, affordability is a real issue for a lot of people.  It's estimated that if rates fell to 6.5% then it would open up home ownership for 1,000,000 people.  Hard to say where rates will go for sure, but we don't expect them to be at this level for longer.  

I would guess that in the future you would qualify.

Also, your math is a bit off above but I wouldn't really worry about it.  Just keep checking in with your lender on where things are.  If you purchase a home every OTHER year, you're going to be a millionaire.  Keep staying diligent with your finances and you will be fine.

Hope all this makes sense.

 @Andrew Postell yeah I get that, but it’s something I’ve heard BiggerPockets podcast hosts say multiple times without addressing this issue. I figured I’d post about it to make others aware haha 

I started working as a realtor on the side to help myself reach the higher down payment loans. & DTI won't matter if I go with a DSCR loan. I just helped a client close on a property using a DSCR loan so I'm familiar with the criteria required now. I believe this'll be my strategy going forward but time will tell. I don't want to slow the goals down, I rather work harder! Not "I can't do this" but "how do I do this" right? Thanks for the reply!

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Vitaliy Volpov
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Vitaliy Volpov
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Replied Nov 22 2023, 21:24
Quote from @Caio Ferreira Torres:

Hello all, 

I've watched a few podcasts where it was stated that it would be smart to house hack every year to take advantage of the low down payment loan options. With the new Fannie Mae 5% down payment conventional option on multi-family properties, I figured it might be possible to follow through with this strategy. However, I own a duplex and the DTI ratio for the next one just doesn't work out. If I'm struggling to meet the DTI criteria on my second property, how could this strategy be used on a year to year basis?

Here's a summary of my situation as an example: 

The unit I currently live in would rent for $2200

My second unit is currently rented for $2700

I rent my garages out for $350

For the next duplex I would live in one unit & rent the other for $2200 

I currently get paid $80k a year or $6667 per month.

75% (2200+2700+2200) + 350 + 6667 = $12342 per month in income

My current mortgage is 2950, my next would be 3300, and my student loan is 250 = $6500 total debt.

6500/12342 = 52.7% DTI


Hey Caio,

I think the answer is that house hacking every year is not possible everywhere rather than not possible at all. It sounds like the roadblock for you are the price to value ratios on small multi-family properties. I don't know your market, but I am gathering that prices for those types of properties are just too high relative to the rents the apartments in those properties can generate. This is not the case everywhere. High-priced metro areas are not really suitable for a repeat house hack investing strategy.

Additionally, there are usually levels of location and quality within the same geographic area that can also make a big difference in the numbers. One part of an area may not be suitable and unable to fit within the DTI maximums, but another part a couple of miles away may be perfectly suitable. Yes, it may be less desirable to live there, but you'd have to weigh all the factors and pros and cons in reaching a final decision.

For example, I live and invest in the Capital Region of New York. The Capital Region is comprised of 7 cities and about a dozen smaller towns and villages. The nicest parts with the nicest school districts are probably not conducive to the repeat house hacking strategy. But, there are plenty of opportunities in between. Someone who's looking to serially house hack in my area probably won't be able to do it in those very expensive/desirable areas, but they also don't have to settle for the really bad, crime-ridden neighborhoods either. There is plenty of in-between. 

Additionally, my area has an abundance of 4-family properties in those in-between areas where a would-be house hacker can benefit from the four rental income streams (instead of just two if they bought a duplex) in order to help stay within the DTI requirements.

Lastly, even if the "on market" prices for rental properties are really high in the area you want to invest, who said that you have to limit yourself to only "on market" properties? I currently own 160 units. I purchased about 130 of them over the last five years by contacting owners who weren't even actively thinking about selling before I reached out to them, let alone had their properties listed with a realtor on the local MLS. Depending on the owner's situation and using a variety of negotiating tactics, my business partner and I have been able to get significant discounts while buying properties from those owners directly. Now, I wasn't financing these properties through conventional means, so DTI didn't matter. But, if I was, those properties would have definitely met the requirements.

The bottom line is this: where there is a will, there is a way. Solutions to your problem are: 1) buy in a less expensive area where price to rent ratios are better, 2) buy three- and four-units instead of duplexes to benefit from more of the income, and 3) buy "off market" from sellers who may be willing to sell at steep discounts and where you're not competing against the masses. 

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Jeff White
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Jeff White
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Replied Nov 22 2023, 21:25

@Caio Ferreira Torres Congrats on getting done with your first one, I started back in 2017, and I've house hacked 7 times since then with a W2 making about the same when I first started, so it is totally possible, you need to understand how lender's calculate Debt to Income Ratio, it isn't just adding mortgages to the denominator. 


I would talk to a lender, they look at your Schedule E section of your tax returns and add back depreciation, so basically, as long as that number is greater than the mortgage, your property will be a net zero on your debt to income ratio or it will be at a positive best case and small negative worst case, so you only have to really qualify for the next property. It is hard to explain in BP, but I would talk to a trusted lender, and he can walk you through it. 

It is possible to qualify for multiple mortgages using the house hacking strategy each year with a solid W2.

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Andrew Postell
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Replied Nov 23 2023, 19:36

@Caio Ferreira Torres yeah, I got ya. Also, DSCR would not be allowed on your own primary home. 25% down is pretty steep for any loan type...that's why we want those "government" loans - less down. Keep checking in. Certainly here to help.

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Julien Jeannot#5 House Hacking Contributor
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Julien Jeannot#5 House Hacking Contributor
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Replied Nov 26 2023, 13:41

@Caio Ferreira Torres

House hacking a new every year is a best base scenario, but it rather difficult for all the points already listed. Real estate is a long term game.

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Jake Andronico#3 Out of State Investing Contributor
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Jake Andronico#3 Out of State Investing Contributor
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Replied Nov 27 2023, 09:25

@Caio Ferreira Torres

Good summary. It's possible for some, but not possible for all and is very dependent on your situation. 

Will need to increase income or decrease debt (or both) for a more favorable DTI.

But hey - you have a duplex, make great income, and are on your way!!

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Ryan Thomson#1 House Hacking Contributor
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Ryan Thomson#1 House Hacking Contributor
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Replied Feb 26 2024, 12:30

@Caio Ferreira Torres you are so close! You nailed the general understanding of how you can qualify for the next one. What can be done to lower that DTI?

1. Ask for a raise or move jobs to one that will pay more.

2. Put more money down - save more money and put a bigger downpayment down to get the DTI below 50%. Or see if someone is willing to give you a "gift" for the downpayment.

3. See if it makes sense to switch to a different student loan repayment plan where the minimum payments are $0/month. That gets you to 50.6%.  (6500-250)/12342 = 50.6%

4. Talk to a couple lenders and see if they have ideas or if they can go higher on the DTI%.

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Corby Goade
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Corby Goade
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Replied Feb 26 2024, 12:42

I like that you are thinking how to do it rather than about how it can't be done. The truth is when you are starting out, DTI is always going to be the biggest challenge...until it isn't. Until them, you'll have to grind and earn it, this is where the going gets tough.

Get a second job, sell your car and drive a beater, etc. 

How long have you been a realtor? Are you making enough that it can be counted as income? 

If not, get a part time job at night with W2 income so you can get over the hump. 

If it were easy, everyone would do it. Best of luck!

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Carlos Valencia
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Carlos Valencia
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Replied Feb 26 2024, 13:58

Hello Caio, 

Your numbers seem to check out. Best solution is to pay off your student loan and that will put you just at 50%. If you can pay it off that's a solution but that only gets you a little bit of room. Still very close to not qualifying. Are you able to increase your income from your W2? Lastly maybe adding a co borrower? 

@Albert Bui @Matthew Kwan @Kin Meng Sio

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Wale Lawal#2 House Hacking Contributor
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Wale Lawal#2 House Hacking Contributor
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Replied Feb 27 2024, 04:24

@Caio Ferreira Torres

It's great that you're considering house hacking as a strategy for real estate investing. However, dealing with Debt-to-Income (DTI) ratios can indeed be a challenge, especially when considering subsequent properties. Here are some potential strategies to address this issue:

Think about methods to improve your revenue. This might entail looking into other income streams like freelancing or a part-time employment, starting a side business, or negotiating a raise at your existing position.

Your DTI ratio may increase if you reduce your current loans. Reduce monthly payments by refinancing loans or concentrating on paying off high-interest obligations.

Look into ways to boost the rental revenue from the homes you currently own. This might entail improving the apartments to support a higher rent or finding methods to increase their worth.

Think about if renting out your homes yourself is the most economical choice. If hiring a property manager frees up your time and enables you to concentrate on activities that generate revenue, it can be worth it.

For your next house hack, think about working as a group. This can entail working together on a project where you share duties and pool resources.

You might be able to get better loan conditions if your credit score is higher. Reduce credit card debt, make on-time payments, and take care of any bad information on your credit report as you work to improve your credit.

Remember that managing multiple properties and navigating financing can be complex. It's essential to thoroughly analyze your financial situation, consider potential risks, and make informed decisions based on your specific goals and circumstances. Consulting with a financial advisor or real estate professional may provide additional insights tailored to your situation.