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House Hacking

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Spencer Shapiro
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Made a Mistake Trying to House Hack

Spencer Shapiro
Posted Mar 5 2024, 07:55

I had lived in a SFH for 4 years. Then, in order to generate more income and also move closer to work, I decided to sell my house and move into a 4 unit MF in a city where I live in 1 unit. I just moved in and 4 days in, I already know I have made a horrible mistake. The other tenants are very loud and the walls are thin. The space is way smaller than I thought once I put my stuff in and I can't even fit everything I need. It's only been a few days and I cannot bear to live here very long. A multi family is not for me and I have to move back into a single family home. I was completely wrong about being able to live with other tenants in the city and am really embarrassed and devastated with this situation.

I got a lower down payment loan (10%) and good rate for this property with the intention of me living in it but I already know I can’t and am honestly panicking in tears. I need to get another mortgage and get back into a single family home. I’m not sure what my options are here. I would want to keep it as a rental since I don't want to immediately sell it obviously and lose a ton of money on my mistake.

I obviously don't want to commit any mortgage fraud and that was absolutely not my intention at the start but I have to do whatever it takes to get out. I would want it eventually in only my name but my parents would help with any situation I need (cosign, coborrow, down payment, or even buy it maybe), however, I just need to get out ASAP. Please let me know if anyone has any ideas.

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Joey Banasihan
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  • Real Estate Agent
  • Boise, ID
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Joey Banasihan
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  • Real Estate Agent
  • Boise, ID
Replied Mar 5 2024, 08:16

Hey @Spencer Shapiro, this is a hard one to reply to because a lot of this is based on folks personal thresholds around tolerance, uncomfortability, etc. It sounds like the main concerns are noise tenants and small space, which coming from a SFH that can be quite a stark transition. My first thought is use this time to understand the quality of living that your future tenants will inherent if they rent from you. Are there ways to improving the sound through foam insulation in existing walls? Many companies out there who drill holes all over and can fill cavities with foam insulation and then just drywall work. Can the space be reorganized in the future to utilize the space better? Will this help you get better market rents? How long are the leases for the other tenants? Do you understand the leases thoroughly to understand how to approach the noise, what the city and state laws are, how your property management deals with these complaints or do they? All of these questions and seeking these answers will only train your mindset on how to approach challenges within real estate in the future, and has the potentional to help you become a better investor/property manager. Just some initial thoughts and hopefully you can get through this!

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Spencer Shapiro
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Spencer Shapiro
Replied Mar 5 2024, 08:27

@Joey Banasihan Thanks for your insight. I'm sure it's mostly just my own personal threshold being weaker than others. These tenants have been in for a while. There haven't been many other complaints to my property manager. I wouldn't say they are crazy loud, they just have little kids. I think another person could live where I am. The leases are for a year. I just personally am at a place in my life where I need more privacy. I realize it's fully my mistake - just looking for any way out.

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Joey Banasihan
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Joey Banasihan
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Replied Mar 5 2024, 08:30

@Spencer Shapiro for sure! Yeah a way out is definitely a tricky one, as you mentioned in your origianl post. As a realtor, I probably will refrain from adding my personal thoughts there. Good luck, you got this!

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Bill B.#3 1031 Exchanges Contributor
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  • Las Vegas, NV
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Bill B.#3 1031 Exchanges Contributor
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  • Las Vegas, NV
Replied Mar 5 2024, 08:55

Do you have enough money left over from your home sale to finance the 4plex as an investment property (additional 10-15% downpayment.) and then still have enough left over for a downpayment on a new home? If not then refinance this home as an investment home and then rent a place yourself until you have enough saved for a downpayment in your own home. Don’t even have the extra 10T to refinance as an investment property? Then really it’s tough it out, buy headphones, etc etc. Or sell, probably break even losing your downpayment and then either rent or buy a new home. 

You’ll get past this. 

New thought. Non-renew a side neighbor and then expand your space by combining 2 units in to one. At least until you’ve lived there for a year and save up enough to buy a new primary. 

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Rick Albert
  • Real Estate Agent
  • Los Angeles, CA
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Rick Albert
  • Real Estate Agent
  • Los Angeles, CA
Replied Mar 5 2024, 09:21

First of all, you did the right thing and you did not make a mistake. Why? Because you put yourself in an uncomfortable situation that will motivate you to move forward.

When my wife and I bought our second house hack, it was a disaster. It was a four month project that took a year and cost way over budget. So what did we do? We moved into our studio ADU and rented out the main house, worked our tails off to pay off credit card debt, refinanced and now live in the main house and rent out the ADU where the tenant is paying more than the interest on our loan. It was painful, scary, and stressful, but we got through it and came out better on the other end.

Use this as motivation to save and buy that SFR (or maybe a duplex is a compromise) and keep this as a rental.

In terms of mortgage fraud, I'm not a lender or lawyer but the language typically says that you got this loan with the "intent" to move in. You did and you are living there. Moving out sooner will trigger questions but most lenders require an explanation (i.e. needing more space) and they move on.

A couple of thoughts that come to mind:

1. I don't know where your property is but can you repurpose the space? For example convert to STR or MTR for your unit to increase cash flow? You already have furniture there so if you are willing to leave it, that saves you time and money.

2. Is there PMI? The goal here would be to remove the PMI as soon as practical using the least amount of money. You could put more money towards the mortgage but then you wouldn't have the funds to buy the next place. Maybe you can make improvements to the property, which would be a better use of money.

3. If you are really in that horrible of a situation, you could go rent somewhere. This would be a step backwards but your mental health is more important than anything else.

4. Could you put rules in place with the tenants? Quiet hours for example.

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Dan H.
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Dan H.
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Replied Mar 5 2024, 17:28

Are you concerned about the mortgage fraud?   I would not be too concerned.   The intent is you reside in the property at least a year. $hit happens and intent does not always become reality.  If you had the intent to live there at least a year (which it sounds like you did to live there at least a year) then it is not fraud.   Be prepared to explain your issues and why it did not work out.  

The bigger issue is under writing is a bit different with a house hack than a rental. No vacancy, no turn over costs, no PM effort on the unit for owner occupied unit. How does the property do if you use 50% of rent as expenses not including P&I? I suspect at 90% LTV it will be negative cash flow using the 50% rule. Are you sure it warrants keeping? Sometimes it is best to pull the band aid off quickly.

It appears you have the resources (parent co-signing, etc) to get another loan for a SFR so that does not have an impact.

Do not beat yourself up.  It is not a huge mistake.    

Good luck

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Dave Hagen
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Dave Hagen
  • Chicago Area, IL
Replied Mar 6 2024, 03:07

Before you jump and make a mistake, try to figure out a solution. Take a pause and a breath. Do you listen to music? Podcasts? E-books? TV? I listen to all of the above using regular over the ear wireless headphones. Sony has some great wireless noise-cancelling headphones. (WH-1000XMS $300-400, WH-1000XM4 $250 on Amazon) They are lightweight, and do a great job at blocking out the noise around you. There are other cheaper options, but earbuds generally aren't as good at cancelling out the noise. They are available at many places including Amazon, BestBuy, Walmart, Microcenter. I think BestBuy and Microcenter have price matching, so take a few minutes to look around online. You could have them in an hour and try them for a day and see if that doesn't solve the problem. I use a cheap pair of $20 bluetooth earbuds, and listen at low volume, so I can hear if someone starts talking to me, but turning up the volume may even be enough for you. Most stores will have a pair of headphones you can try, to see how well they fit and work. (Rock & Roll sounds best when played loudly... Mwahaha) This might be a permanent solution, but at least it might get you through the next couple of days.

Real estate is all about solving problems. Ask anybody here. Nothing ever goes smoothly, perfectly according to plan, without any problems. If you panic, then maybe this isn't for you. But I think you can work this out. After all... you did come here for ideas. Just remember not to jump at the first suggestion, but back up a bit and analyze the options you have to see what works best for you.

Good luck.

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Jeremy Jareckyj
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Jeremy Jareckyj
  • Real Estate Agent
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Replied Mar 7 2024, 07:38
Quote from @Dan H.:

Are you concerned about the mortgage fraud?   I would not be too concerned.   The intent is you reside in the property at least a year. $hit happens and intent does not always become reality.  If you had the intent to live there at least a year (which it sounds like you did to live there at least a year) then it is not fraud.   Be prepared to explain your issues and why it did not work out.  

The bigger issue is under writing is a bit different with a house hack than a rental. No vacancy, no turn over costs, no PM effort on the unit for owner occupied unit. How does the property do if you use 50% of rent as expenses not including P&I? I suspect at 90% LTV it will be negative cash flow using the 50% rule. Are you sure it warrants keeping? Sometimes it is best to pull the band aid off quickly.

It appears you have the resources (parent co-signing, etc) to get another loan for a SFR so that does not have an impact.

Do not beat yourself up.  It is not a huge mistake.    

Good luck


 Dan is correct here. Key words are intent and the effort to do so.