All Forum Posts by: Masyn Grant Barney

Quote from @Alecia Loveless:

@Masyn Grant Barney Depends on your market. In areas I’m familiar with you can still put down 20% and get decent cash flow on certain properties.

 For sure! I guess I should have specified in my post that I was talking about Utah and similar markets. A standard 4plex sells for $1M but rents for $4800 with a $6k+ mortgage. Significantly negative soft cash flow. Not to mention reserves. 

@Greg Kasmer, interesting. So are you saying you bought it at a discounted price because rents were low? If not, how is it an advantage to buy with low rents if the property is being valued based on comps? 

You may also be running into the FHA self sufficiency rule if it is a 3 or 4 unit property. The rule states that 75% of market rents for all units must be more than the total mortgage payment. Which in many markets with todays interest rates is all but impossible. So 15% down may be needed to hit that mark.

But like others have states, 5% down conventional is now an option and IMO is the best route. 3.5% FHA will come with points of 1.75% that typically gets wrapped into the loan. So while its less cash out of pocket up front, you end up with much less equity out of the gate. So I always recommend 5% conventional over 3.5% FHA if the client can make it work. 

I think it is a great product! I wouldn't go less than 5 years on an ARM personally but 5 years with those terms sounds awesome!

Here in Utah we have a local credit union (can do loans in 10-15 states though) that has a similar loan. $0 down first time home buyer loan, no PMI, 40 year loan (lowers your payment even more), and get this, NO INCOME CAP! Crazy I know. Only downside IMO which isn't bad at all is that it has a balloon at 15 years. Slightly above market rate, and you can't buy the rate down. But I absolutely love the loan.

Enjoy the awesome loan product man! 

@Kyle Mason, did you use a legit escrow specialist for your sale? If so, most lenders can remove that debt off your DTI after 12 payments have been made.

I recently had to do this for a property I bought with a partner. The lender just needed to see payments being made for 12 months out of a bank account that was not mine. Essentially saying that while I am technically responsible for the debt, history shows I am not paying it. 

LMK if you have questions and I am happy to connect you with a lender who could do this for you. 

Not exiting at all ;) 

Is there an HOA? I'd look through the official docs first. I did have a townhome that I sold to a client that had an HOA trying to restrict the use of the units to single family use only. No renting of any kind and explicitly mentioned even renting to others who live with you. So I would check those docs first. I imagine if they say nothing, you could start doing it and would have to be grandfathered in? Not sure though since HOAs seem to have way more power than they should IMO.

If the HOA doesn't say anything, then I would check occupancy limits with the city. Most college towns here in UT restrict to 3 unrelated people. So you can have a family + 2. Or 1 single person +2 friends, etc. Other cities in UT allow for up to 4 unrelated. This would likely be the only restriction the city could keep you to. 

This is the best way to house hack as a single person IMO. Here in Utah, I often recommend to my single friends buying a new townhome (we have some awesome new build incentives) and renting by the room. 

For young working professionals, they like the new townhome vibe. The HOA bill comes with advantages for this population because it also usually comes with some amenities like a pool, hot tub, gym, etc. Not to mention that (at least here in UT) you can get more in rent when renting by the room than as a single lease most of the time if you have 3-4 bedrooms.

But if your preference is a single family home, I still think it works great! Seems like you are off to a great start. If the numbers work and your life situation allows, rinsing and repeating every year is a great strategy with this type of house hacking. 

Small Multifamily (2-4 units) Only Works 1 of 4 Ways Right Now

1. Large down payment sacrificing Cash on cash return. You may be able to break even or cashflow, but you'll be putting 25%+ down and your CoC will be pretty bad. So if CoC is your metric, look elsewhere.

2. House Hacking. Your numbers may not seem to make sense from a cashflow position, but you will be getting into a multifamily property with very little cash (comparatively) and lowering your mortgage expenses compared to not house hacking. You will need to wait to refinance or wait for rent growth or both to be able to move out and at least break even.

3. Seller finance / subject to / assumable loans. All three ways can get you into a small multifamily property at a lower monthly payment compared to market so that you can cashflow. You will likely need a large down payment like you would in #1 but your cashflow position should be better. These are much harder to find and require more work and potentially more risk.

4. You are able to do short term rentals. Short term rents are typically higher than long term and could push you over the edge to break even or possibly cashflow. You are intentionally trading time for money to make the numbers work. This is definitely not the path I would take unless the numbers are sweet and STRs are fully legal in the zone your are buying.

Is there any other way to make them work in this market? Would love your thoughts!

Quote from @Grady Gilman:

I think that's a very undervalued way of getting into house hacking while also easily forcing appreciation. I've been looking for properties with unfinished basements to do this onto and there's a reasonable amount of properties that could have this work. In your personal strategy are you still renting out the main floor rooms in a house hacking strategy? Are you value adding anything aside from the basement?

Great idea!

No I’m not renting the main floor rooms out. I’m married with two kids so we occupy the entire main floor. Then we STR the basement primarily on Airbnb. 

Depending on the property there can definitely be some other value add. You could easily find a light flip (carpet & paint) that also has the potential for a basement kitchen addition.