All Forum Posts by: Derek Brickley

Love it!!  Very comprehensive overview and well explained.

The benefit to a multi family househack is that you can consider both!  You can use your income but also add 75% of the gross rent from the other unit(s) to qualify for financing in most cases and for what you can afford.  The rent from the other unit in most cases won’t entirely offset the payment (although it could) and you would be responsible for the rest from your own income.

I guess my question would be does it not cashflow when you are house hacking, or does it not cashflow if you move out and rent the whole home?  I’m assuming this is a rent by the room strategy.  I always find that the main goal is to decrease/eliminate your housing expense so if it only doesn’t cashflow while you’re househacking I don’t think that’s the end of the world.  Now if it doesn’t cashflow when you move out that may be a different problem.  That’s why I’d be curious of your cash on cash return.  $40k to cashflow $100-$200 may or may not be worth it depending on your market and investing goals.

I think that's a great idea. How many properties do you currently own? There may be extra liabilities with student rentals you may want to consider and may want to put it in an LLC. Students tend to put more wear and tear on properties so at least acknowledge that when underwriting your deal. Great way to put your money to work during those years all that would be going straight out of your pocket!

Quote from @Felix Piper:

Thanks for the replies. So how long do u have to stay at the property until u could move out? Or as soon as u move out u have to refinance? If someone is house hacking every year, do u have to get a new loan everytime?

The general expectation is that you live in the property for at least a year. You do not have to refinance the property when you move out, but if you plan on house hacking again you may want to refinance. For example you can only have 1 FHA loan at a time so if you use it for your househack and then move out, you would need to refinance out of it to use an FHA loan for your next househack. Not all loan products require this though

Hi Felix!  In reality there isn’t any “proof” of occupancy needed other than a submitted intent to occupy during the application stage of your loan.  If there is any discrepancies in that however your lender may require a letter of explanation or further proof.  If you don’t end up occupying it after saying you would there are quite a few things that could happen, but all result in some serious consequences for example fines or they could call the loan due.  However, they could also do nothing though. Just depends.

Quote from @David Zimmer:

Quote from @Matthew Kwan:

HI David, What is your current loan that is still has the remaining amortization of 15 years? Yes you can definitely use FHA for multifamily if you haven't used FHA towards your first townhouse. Even if you do end up using FHA on your first loan, there are way exceptions that allows you to use 2 fha loans simultaneousl and also being able to use your fha rental income to qualify if your were doing househack on your townhouse. @Albert Bui @Carlos Valencia

 It's a conventional 15 year  - so actually I have 13 years remaining on it.

I think what I'm gathering is that there ARE 5% conventional mortgage options. I wasn't sure if the 3.5-5% down was FHA only. And as @Kass Farran mentioned, I'd prefer to do 5% for the PMI + UFMIP cost benefits as the 1.5% isn't a deal breaker.

Yep totally agree with what has already been said. There is no reason you can't get another FHA loan as long as you intend to occupy the property as you primary. FHA has that Upfront Mortgage Insurance Premium and the monthly Mortgage Insurance tend to be higher than for conventional.

The option mentioned above (Freddie Mac Home Possible) is definitely a great option if you meet the income requirements for your area. The Private Mortgage Insurance is going to be much less than FHA (not to mention it can be dropped when 80% LTV), no Upfront MIP, and it is less sensitive to Loan Level Pricing Adjustments. You can use this product even if you currently have ownership in one other property, so having your townhome won't impact your eligibility.

A good investor friendly loan officer should be able to help you weigh these options based on your specific situation, so definitely reach out and ask around!

Quote from @Lawrence Potts:

Hey @Taylor Robertson,

Are we looking for a home run every time we go up to bat, or can we live with base hits? What you think is a good deal is dependent on your goals and what you’re wanting the property to accomplish for you. To some, it’s a bad deal because some people want X amount of cashflow. Other people don’t even care about cashflow and would purchase with negative cashflow if it meant they would save on taxes, etc. So it’s dependent on you.

Now I can assume some of your goals based on the limited info. You’re house hacking your second property so cashflow seems important.

The way I see it, renting out both sides would be profitable. However, living in one side still leaves me with likely $1,000 after factoring in maintenance/capex savings, plus utilities. Should I reconsider?

If it’s going to be profitable when you move out and rent both sides, I’m not seeing why this isn’t a good deal? $1,000/month + depreciation + tax write offs for interest & repairs/maintenance on other unit + equity + principal paydown + appreciation seems like a good deal to me! Don’t get so stuck on one metric that doesn’t match a previous deal you got years ago. Comparing the two doesn’t make sense because you’re in two different markets (interest rates primarily). I would not reconsider. 

So I do have some red flags though:

1. Your agent is NEVER going to be spot on with your monthly payment. They’ll have an idea, but your lender will let you know ahead of time if you ask them. If you’re already under contract, did you submit a preapproval letter with your offer and did your lender not go over estimated mortgage payments with you? 

2. 5% down @5.875% interest

P&I-$1551

Insurance~$185

Taxes~$260

Pmi-$80

Total-$2085

I have hesitations with this: typically you cannot go 5% conventional on a 2-4 unit owner occupied. You either can go 3.5% FHA or go 20-25% down conventional. I highly encourage you to double check with your lender about this (unless they are offering a 5% down product that we should all know about!). This could break a deal if your lender doesn’t understand this. And I’m surprised the listing agent didn’t pick this up as well when reviewing the offer.

 Actually Freddie Mac’s HomePossible allows owner-occupied 2-4 unit properties with as little as 5% down.  Only catch is the income requirements, but can be a great way for well qualified buyers.

Quote from @Taylor Robertson:

Under contract on duplex in a great neighborhood. Purchase price is $276,000. Rent per unit would be $1200-1400 per month, likely on the higher end of that. I got my monthly payment yesterday, and now am having second thoughts, as I hoped the mortgage would be lower so rent would cover most of it because my agent led me to believe the mortgage would be roughly $1500/month. 

The home is only 7 years old with likely minimal maintenance. The way I see it, renting out both sides would be profitable. However, living in one side still leaves me with likely $1,000 after factoring in maintenance/capex savings, plus utilities. Should I reconsider? 

5% down @5.875% interest 

P&I-$1551

Insurance~$185

Taxes~$260

Pmi-$80

Total-$2085 

 What I always recommend is that you run the numbers as if you will rent both sides, to see what you could expect.  In terms of a successful househack I think the most important thing is to reduce your current living expenses.  If rent in that area generally runs 1200-1400 and you’re living there for 1000 that can still be considered a success.  However it really depends what you’re looking for.  As mentioned above the payments really is something that your lender should have nailed down early on in the process.  

Quote from @Lawrence Potts:

Yes, they would make an exception for your unique situation. @Grant Schroeder may be able to shed more light on this, but I know that FHA has rules about geographical locations of properties using another FHA product (google 100 mile FHA rule), and typically they want to see 12 months of occupation and at least 9 months seasoning before refinancing. But they have to make exceptions in these situations because they are out of your control.

Hi Juan!  Lawrence is absolutely correct.  As long as you intend to occupy it for the first 12 months extenuating circumstances can have you move such as relocation.  Good news is that if you move more than 100 miles you should be eligible for another FHA loan if you wish to househack again.