I have very cheap rent, does house hacking even make sense?

Question

I'm looking to get started with the elusive first deal. I'm currently paying very little for monthly rent. I'm seeing some advice that house hacking or purchasing a 1-4 unit with an FHA or traditional loan is a smart way to go. Is this strictly from a funding point of view? I am most interested in long term holding for cashflow and BRRRR strategies. Is financing the reason why this is recommended?

Do the experienced people of bigger pockets agree that your first investment should your own home so that you are no longer paying rent? Does this still apply if you can charge more rent for the unit than you are paying in rent?

Edit B. · Answer

@Jeff Lundeen FHA house-hack is often recommended because it can be a starter for anyone with income and little cash. You're leveraging a lot of bank money, and this is only available to owner occupants. Its hard to beat that from the ROI perceptive.

In your current scenario you have Utilities + Rent(Paid) = total cost of renting

In quadplex scenario you have Mortgage + Utilities + Potential Repairs - Rent(earned) = total cost of owning and land-lording

You can decide after you've ran the numbers, but chances are its a much better investment to own the quadplex, unless you're in highly inflated places like SF or NY.

This is obviously only a cash-flow analysis which excludes other perks of owning(mortgage pay-down, potential appreciation)

Jeff Lundeen · Answer

Thanks guys.  I kinda figured that to be the case.  @Edit B. I'll use that calculation when looking at my properties.

Andy Mirza · Answer

@Jeff Lundeen I like to look at my personal residence separately from my investments. Quality of life is separate for me. My wife and I were at odds at one time because I wanted to house hack and buy a duplex. I'm glad she won out because the townhouse we bought in a great neighborhood has been fantastic for us and our kids.

Stick with your cheap rent if it makes you happy and save up for your investments. There's no rule that says you have to own your own home before you own investment property!