Am I ready to house hack?

Question

I am 22 years old. I just recently graduated from college and I am making about 40k a year doing personal training. I have enough money saved up to pay for a house using an FHA loan but I feel like I would be screwed if the house was damaged and I had to pay thousands out of pocket to fix it. I am currently looking for a more stable job than personal training, (hours fluctuate weekly) but I don't want to keep paying rent to a landlord. I want my income to go towards something I own. I may need a cosigner but my parents don't think I am ready to househack. Am I ready to house hack or should I find a more stable job before I dive in? Looking for some guidance here please and thank you.

Benjamin Sulka · Answer

Anthony,

Love to see that you're looking to house hack. I'm 23 and looking to house hack just like you.

I've had a lot of the same questions and I came to the realization that I needed to have enough funds for the down payment, closing costs, and a reserve amount that I''m comfortable with. I've almost hit my savings goal and looking to purchase within the next few months.

I'm not sure how long you've been doing personal training but the ability to qualify for a loan requires income history. If that isn't a W2 job, I'm not 100% sure on what the requirements are but you can look it up. Typically a lender wants to see a couple years of documented employment/income history. Sometimes they will make it work if you were in college during that time. You're right on the cusp of being ready based on what I'm hearing. Continue to save your money in a high-yield savings account and maybe find a side hustle outside of your personal training. Drive Uber, walk dogs, wait tables, something to expedite this process.

In the meantime, continue to educate yourself on house hacking and real estate investing in general. Talk to a few agents and lenders in your area that work with real estate investors and even house hackers more specifically. Build your network and build your knowledge. Go to local meetups and REIAs through Meetup.com, EventBrite, BiggerPockets events, etc.

I hope this perspective helps as I'm someone who is in a similar situation!

-Ben, aspiring multifamily house hacker

James Carlson · Answer

@Anthony DelVecchio

Yeah, don't get in over your head, but you also don't need $15,000 in savings or anything. A roof doesn't just go from working to gaping hole. A furnace could go out (maybe $5k). A hot water heater ($1k). A sewer would be the worst (could be $3k, could be $15k), but that's really rare.

How much would you have in savings after a 3.5% FHA plus 1-3% closing costs? If you had $5, maaaybe $10k in savings, I'd feel pretty good to move forward. Your inspector should give you a good idea if there's anything big and pressing.

Also, if you house-hack, that hopefully means you'll pay a lot less in your mortgage than you're currently paying in rent? Save that amount toward repairs and capX.

Jeff Schemmel · Answer

@Anthony DelVecchio an important part about buying an investment property is having some reserves.  with an FHA loan, you need to pay at least 3.5% of the purchase price out of pocket, plus 2.5-3% of the price in closing costs before even talking about reserves.  Alongisde that, it will be important to have stable employment, because your job is what helps you qualify.  One advantage to househacking is the rent from the other units in a multi-family property can be added to your qualifying income (with some exceptions).  I think, whether you're ready from a cash perspective or not at this point it would still be helpful to build a relationship with some trusted lenders who have demonstrated experience with helping househackers/investors for them to coach you a bit on what steps to take now while you are saving up!Of course, Down payment assistance is available and the you can negotiate closing costs in certain circumstances but your chances of doing both are only reasonable if the property/seller are in a tough spot and the property isn't popular on the market.  I think you should not expect/count on this for your first property.

Alecia Loveless · Answer

@Anthony DelVecchio I would suggest having some amount of money saved in reserves for just the type of emergency repairs you have mentioned before buying your first house/property.

If you have a good building inspection done during your due diligence period it can help you discover much of what may go wrong with your property initially but there is no guarantee other things may not happen.

Likely the roof and the HVAC/furnace will be the biggest expenses that might occur but a hot water heater here, a clogged toilet there and suddenly the bills start adding up.

Granted I have 7 buildings and I just haven’t had that many problems and so far my only real “emergency” was caused by a tenant under the influence of who knows what who overflowed a portable washer he shouldn’t have been using in the first place and flooded the downstairs unit.

Wale Lawal · Answer

@Anthony DelVecchio

It's great that you're considering homeownership at a young age! House hacking can be a fantastic strategy to start building wealth through real estate. However, it's important to carefully evaluate your financial situation and future plans before making such a significant decision. Here are a few factors to consider:Assess your earnings, outlays, and savings at the moment.A reliable source of income is helpful, but it's not a prerequisite for house hacking in every situation.To handle unforeseen costs associated with homeownership, think about creating or keeping an emergency fund. Think about your ambitions for the future—both personal and professional. Recognize that there are obligations associated with being a homeowner. The plan includes upkeep, repairs, and unforeseen expenses. Recognize the obligations that accompany property ownership.Before making a decision, it might be helpful to consult with a financial advisor or a real estate professional. They can provide personalized guidance based on your specific situation and goals. Remember that everyone's journey is unique, and there's no one-size-fits-all answer. Take the time to assess your readiness, explore your options, and make an informed decision that aligns with your long-term goals.

Jeremy Jareckyj · Answer

Having a little bit of a emergency fund is important. You don't want to put yourself in a super tight spot where you don't have the ability to pay for a large expense (which are inevitable)

You are super close!! Congrats to you

Melanie P. · Answer

You seem a bit undercapitalized to pull off a house hack right now, but you are not far off.

What is your degree in? Where are you located?

If personal training/fitness is all that interests you right now try to make your personal training more effective. Market yourself at hourly rates to do the training at your client's home. Start a local "lose weight" club for a monthly fee.

Am I ready to house hack?

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