House Hacking in an Expensive Market?

Question

Hello BiggerPockets community! I am posting a question to much more experienced investors today, as I am a newbie hoping to purchase my first property soon at the age of 20, about what strategy works best given my market. I live in Rochester, NY and currently it seems the market is inflated/expensive/high (one of those work right?!) and as such I am having a difficult time finding decent cash flowing properties, if any at all (most are CoC of < 5%). I know that patience is a virtue and I can make a deal out of something less desirable through some creativity but I was mostly wondering what I should be seeking out of properties with a market of this type.

On the one hand I have enough cash for a house hack using an FHA loan and some additional minor remodels/repairs to a property after purchasing. At the same time, a traditional house hack in my area that produce any sort of decent cash flow (as I eluded to) is looking extremely difficult to find. As Brandon Turner says I should probably just give up and go back to watching TV... not! I would just love to hear any insights on how to get creative or potential different strategies to the traditional house hack that others have used when buying rental properties in a rather expensive market cycle.

Thank you for your time!

Martin Grizzanti · Answer

hey @Carter Mezzio I invest full time in Rochester feel free to reach out-happy to help

Brandon Rush · Answer

Hey Carter,

As Brandon Turner also says, how many offers did you put in this week? Here are few recommendations I have:

* Start putting in more offers at prices that make sense for you
* Do a mailing campaign to local property owners on properties that meet your criteria
* Drive for dollars and reach out to owners of potential properties you that fit your criteria
* Post to your local investor FB group to letting them know you are looking for a house hack with some basic criteria
* Reach out to owners posting their rentals on FB marketplace to see if they would be interested in selling

Also, I am not sure if you have heard of it, but there is a FHA 203k loan which will allow you to roll your repairs into the loan if you expect some rehabbing after purchase. I recommend going that route instead of coming out of pocket.

Good luck on your search, keep pushing!

Nicholas L. · Answer

@Carter Mezzio I would say just keep doing what you're doing then.

Carter Mezzio · Answer

Hey Nicholas, thanks for the input! I have not been looking for too long per-say, roughly a month or so. My partner and myself are primarily looking at small multi properties unless we find a good cash-flowing rent by room situation. We are yet to be pre-approved fully for financing but are in talks with lendors and financial metrics seem to be pointing towards a good position.

Carter Mezzio · Answer

I'm glad to hear your South Wedge property is doing well! That gives me confidence the area(s) nearby have potential too haha! My partner and myself are looking to get an FHA loan and a 30-year fixed mortgage so 3.5% down (ideally). We are still in the process of talking to lendors and figuring out exactly what rates we can get. I have also started exploring the idea of using the equity built from the first year as leverage into the next property's down payment as an option, though I will have to research and educate myself more on this.

Tim Corey · Answer

@Carter Mezzio Our first property was in the South Wedge, it's worked out great so far! My wife and I lived in the area for 5 years, it's my favorite area in Rochester. Availability is pretty low there though, it seems like (for on market at least) Beechwood and Maplewood have more. I think your ability to purchase another house in a year or two is 90% dependent on factors outside of your first purchase. Income, current savings, etc. What type of mortgage are you looking to get for the first property?

Nicholas L. · Answer

@Carter Mezzio Rochester is not an expensive market.

Are you looking to buy a small multi or rent rooms?How long have you been looking?

How much financing are you pre-approved for?

Carini Rochester · Answer

I agree that those are the neighborhoods in the city limits to be looking in. Do you definitely want to be in the city limits? There could be some opportunities in Irondequoit, Greece, Henrietta.

Carter Mezzio · Answer

Hey Tim, thanks for the reply! I have been looking mostly in the neighborhoods of South Wedge, Maplewood District, and Beechwood (where there seem to be the most multifamily properties listed). I have been looking at CoC and also NWROI, which accounts for rent savings as you touched on, and NWROI is much better after factoring in those sorts of gains/savings. It could be a matter of wanting too much, especially from the first property, though I also just want to make sure I can afford another property in a year or two.

Tim Corey · Answer

Hey Carter! I'm located in Rochester and have done 2 house hacks, the most recent one was purchased this past October. What neighborhoods are you looking in? When you are running your numbers, are you accounting for the money you'll save not having to pay for rent?

House Hacking in an Expensive Market?

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