All Forum Posts by: Christian M. Conroy

Thanks @Nathan Grabau! I had not accounted for appreciation in the numbers I was running. That's a good point. Obviously it won't get someone that much further along, but it theoretically would speed the timeline along depending on market and timing. 

I've lived in DC for a while but am fairly new in terms of diving into the real estate market. I'm talking to a lot more local investors and RE agents in the coming weeks, but based on my convos thus far, it is not likely I'd be able to find anything above a duplex or ADU here. And that's for the wider DMV area, not just DC proper. While there may be some quadplexes here and there, none of them would pass FHA self sufficiency tests based on those I've talked with and the numbers I've ran myself.

I have not looked into the 95% LTV refi option but I'll do some research. We've mainly been thinking of a situation where we live in a unit and rent out another unit at least, so I have not really considered one unit options.

But if living in one unit and just paying fully before moving out and having that one unit become a full rental when we go to the next one ends up proving more financially advantageous in the market we're looking at than multi-family, then we'd consider it. 

Hi all, 

My partner and I plan to buy with the broader DMV area with the intention of moving in around March, 2024 when out rental lease ends. We're giving ourselves a good lead time to do all the necessary research and numbers running, especially given the high price of the market we live in. And that's even accounting for the fact that we're willing to move anywhere around a ~1 hour drive into DC radius.

We are very interested in house hacking. I've read lots of the main books on the topic and now am just figuring out how to tailor the approach to our specific market. One of the key points discussed in a lot of these books is a strategy that involves buying a place with a 3.5% FHA interest loan, living in it for at least a year and for as long as needed to get up to 20% for a conventional loan, refinancing to a conventional loan, buying another place with an FHA loan, and then doing it all over again while also renting out that original unit fully.

I'm a bit unclear as to how that is a feasible strategy given the amortization schedules I am looking at. For example, let's say one buys a place for $400,000 at 3.5% down for a 30-year fixed term with an FHA loan. That means a loan of $386,000. Let's go back to the good ole days just for the example and use an interest rate of 3%.

I've calculated out the monthly principal and interest rate payments manually, but you could also see the full amortization schedule conveniently with a tool like calculator.net. 

In month one, you'd have a principal of $662.39 and interest of $965.00. In month two, that would be $963.34 and $664.05. In month three, that would be $961.68 and $664.05. And so on. Each month the principal pays down the loan balance and adds to equity. Starting from the 3.5% equity at the onset of the loan, it would take 89 months, or 7 years and 5 months to reach 20%. Not exactly a timeline that seems to be part of an early retirement plan. 

Adjusting the interest rate down to 1% changes it to 70 months, or 5 years and 10 months. 
Moving it to 0% only gets it to 61 months, or 5 years and a month. 

So when people are suggesting this as a useful house hack strategy, are they suggesting you pay more than your required monthly at some point to build equity faster? 

Or is this just a lesson that this strategy is only worth it in a very low interest rate environment in a low price market? 

Or am I just doing the math completely wrong here? 

Thanks in advance for any answer!

Thanks @Tim Jacob. Yeah, I think Baltimore is firmly on the list of places we'll be exploring. I am not as familiar with the neighborhoods there as I am in DC, but we've got some time to do some legwork research this year. 

And @Jack Seiden, you mentioned going far enough into the suburbs (30-40 min from the city) to rent out the basement. What areas do you think are likely good areas to look? And you're saying that likely the only rental opportunities that aren't rent-by-room are likely English basement situations in those areas? Those would be considered ADUs as opposed to duplexes, correct? 

Thanks!

Thanks @Tim Jacob. That's an option I've been considering. I don't know Baltimore that much beyond some internet researching I've done. Heard Hampden, Old Goucher, Station North, Resevoir Hill, Bolton Hill good to look into for example. 

@Jack Seiden thanks for the response. Yeah, that seems to be the case. My partner and I have animals and there are just past the point of getting a single family home and doing a rent by the room strategy.

In terms of when we'd be buying (Spring 2024), my thinking was that even though rates are high right now, we'd be able to use that to get a lower price or secure some concessions in a market where sellers have less leverage. And then the timing would work out to where we'd refinance somewhere between a year and 2 years later after hitting 20%, which would allow us to convert to conventional loan and then reuse the FHA somewhere else all the while benefiting from what would likely be low interest rates by then. But that's just the theory right now.

But I figured we would not find much good MF in DC. That's why I'm considering surrounding areas. Baltimore, Alexandria, other places in NOVA and Maryland, etc.

Any insight into basically how far out of DC one needs ot go to start to find duplex, triplex, quadplex opportunities? 

Hi everyone, 

I just signed what we agreed would be our last one year rental lease in Washington, DC with my partner. We plan to start the real estate buying process of finding the lender, real estate agent, etc. sometime in early Fall of this year with the intention of closing on a place around March, 2024 when our rental lease ends.

We are very interested in house hacking. I've read lots of the main books on the topic and now am just figuring out how to tailor the approach to our specific market. I'm especially attracted to the 4-3-2-1 strategy. 

As I'm sure many of you know, 4-3-2-1 works by starting with a four-family property. After getting your four-family property, you will live in a unit for at least one year, according to Federal the FHA conventional guidelines. You can then lease out the other three units for rental income. This extra income will pay your mortgage and provide your cash flow. The next step is to refinance your first FHA loan after 12 months or once you get to 20% equity. Then you repeat with a three-family unit and then a two-family unit and then you ultimately purchase a single family home. Depending on how everything goes, I could see us delaying that single family home purchase if we're happy with the cash flows we're getting from the house hacking.

But I'm not sure where the best places in the DMV area to start this approach are. Based on my living here for many years and what I've read, it seems the only house hacking opportunities in DC are english basement/ADU opportunities or SFH rent-by-room strategies.

We both work remote but my partner has some things that keep her attached to the DC area. I think we'd be willing to go around an hour outside of DC for the right opportunity. We can likely afford something in the 800 to a mil range, but are really only interested if we think we can get good cash flow. I've heard previously that it might be hard to get good cash slow at those ranges, but then again DC also demands some fairly high rents, so maybe it's possible in this area. This is all just what I've heard as we have not run the numbers yet on any specific properties. 

Any advice on where to look to potentially find cash flow generating quadruplexes in the DMV area? Do those even exist? Or would it be better to reduce our expectations and shoot for a triplex at the upper bound? 

I'm new to the forum, so thanks for any advice!