Second Property Snag
So I bought my first house hack febuary 2025, I put down 10% on a $380,000 duplex because at the time, that's the lowest amount my mortgage broker said I could put down. (Full context I have great credit 780-800) now I know with the house hacking strategy, you have to occupy a unit for a minimum of 1 year if you don't put down atleast 20%. Cool. Fast forward, I saved some money, my 1 year is up, I'm ready to do my second house hack. My first mortgage broker has since retired, I found a new one. He's great and hes very familiar with the bigger pockets podcast and the strategy I'm trying to do. He said he can get me to where I only have to put down 5% on my next house hack. The problem I've now run into is that he said when it comes to the underwriting, they're not going to allow me to purchase another multifamily house unless it's more sqft or of higher value. Essentially I can't do a lateral movement. When I asked how much value the next proooerty has to be, he told me I'll probably need to be in the ballpark of 500k if I want to buy another multifamily at 5% down. I'm fine with that, but my issue is I don't have enough liquid cash to put that money down, closing costs, renovations and have a minimum 10k nest egg (for my own personal peace of mind). So I don't really know what to do?
I would need to save another 20-30k to buy another multifamily. So my new idea is potentionally to do a BRRR, cashout refinance on that and then buy another multifamily, that way it's eliminating the lateral movement. But when I'm running the numbers:
• Purchase price: $250,000
• Down payment (3.5%): $8,750
• Acquisition loan (+ FHA upfront MIP): ~$244,000
• Closing costs to buy (~3%): ~$7,500
• Renovation (DIY materials, to force $250k → $400k): ~$55,000
• Total cash out of pocket: ~$71,250
CASH-OUT REFI — ARV $400k @ 75% LTV
• New loan (400,000 × 0.75): $300,000
• Minus payoff of acquisition loan: −$244,000
• Minus refi closing costs: ~−$8,000
• Cash back to you: ~$48,000
The math just doesn't math. Yes, I would have a second property with 100k in equity and in terms of the house hacking, it solves my lateral
movement problem but it still doesn't solve my liquid cash problem that I had in the first place. Not to mention, a move like this very well might just break even for me in terms of rent. Is it even worth to keep at that point?
Now I will say, my tenants in my current duplex between unit A and a detached 2 car garage tenant, are paying for my mortgage, so when I leave unit B that I live in, I will be profiting 1800-2k in rent, but that would be used to pay the mortgage on the single family until I could buy another multifamily. And then even after that, when I buy my third multi family will I have to upgrade again to a 6-700k multi? I'm just confused and frustrated on what my next move should be. Has anyone else ran into these problems and if so what's some good work arounds I could employ?
Most Popular Reply
Congrats on the first house hack. Getting that first property is usually the hardest part, and it looks like you’re in a pretty good spot. Having your tenants cover the mortgage while you build equity is a big win.
I think the biggest thing is don’t feel like you have to force the next move. It’s easy to get caught up thinking you need to buy the next property as quickly as possible, but the deal still has to make sense.
I wouldn’t buy a bigger property just because it lets you house hack again. I’d make sure you still have enough cash left over and that the numbers work.
Sometimes the best move is letting your first property keep working while you save and wait for the right opportunity. The goal isn’t to own the most properties as quickly as possible. It’s to build a portfolio you can actually hold onto.