One successful house hack down - whats next?

Question

My wife and I achieved our goal of buying our first duplex and house hacking half. I’m only 6 months in, but am trying to figure out what is the next move. I would like to rent it all out and finance another duplex, but im not sure how to best make that work. What are some other creative ideas for moving from your first house hack to your next investment? Thanks to anyone who responds.

Steve Vaughan · Answer

Beans and rice beater driving scorched earth budget to save as much as you can while you satisfy your 1 year occupancy requirement.
Then buy another low down househack. Start searching at about month 10.
Rinse and repeat as long as you can stand it.

Lawrence Potts · Answer

I’d argue that refinancing should be considered depending on the loan type. In some situations you are only allowed to use FHA on multifamily up to 2-4 units. I’m surprised you were able to go 5% down conventional on a multifamily. This may be because it’s only for first time home buyers? But understand the current loan type. It may not let you have two owner occupied loans at one time of this type. So you may need to refinance the current mortgage into a standard conventional mortgage to be eligible to reuse the low down payment mortgage. For example:

When we bought our 4plex in August of 2020, we could only use FHA 3.5% down. We then had enough equity to refinance out of FHA into conventional in April 2021 and then we can get another multifamily to house hack using FHA 3.5% down rather than going 15-20% down conventional.

So sometimes it makes sense to refinance, even if it means you have to sacrifice in interest rates.

Talk to your lender and see what your mortgage is exactly or talk to a BP friendly lender and see what you would need to do to pursue the next property. You will need to fulfill your 1 year obligation. I highly discourage mortgage fraud. Be honest. Lying may help you get the next deal but you can burn bridges and hurt your networking abilities and also find yourself in legal trouble. Not worth it.

Hope that helps! Congratulations on locking in your first house hack!

Andrew Duna · Answer

Hi Thomas! Congrats on the first house hack! As I'm sure you're familiar - after you spend 1 year in your current duplex you become eligible again for primary residence financing (5% down). I think Steve recommended a very fair strategy of living on a budget but I personally do not want to ever live frugally, In my opinion it's just not worth it. (If possible) I would recommend finding ways to make more money by starting up some sort of side hustle or service in order to stack extra cash for your next down payment.

I'm not sure what your buying strategy was for your first duplex but if you completed some home-reno and added some equity then you can also utilize a home equity line (HELOC) against the first duplex for your next down payment (it would just be counted in your DTI when qualifying). This way you can start building the equity in your next property and utilize that 5% down loan again as quickly as possible.

Thomas Hall · Answer

Thank you all for your very helpful responses. A lot to consider. Just to clarify, this home was a 5% down conventional and the loan does require a year as primary residence. As I do understand it, I will be able to get a second loan at 5% down even though I wont be a first time homebuyer, as long as I pay mortgage insurance. Unless anyone has any clarifications.

My last loan officer was not well versed in the concept of “house hacking”, so Ill be searching for one in my area that knows the ins and outs of the concept to help me move forward with the appropriate financing. I suppose I need to crunch numbers and decide if a HELOC or a refinancing would be a better option to reacquire some of my initial capitol.

Dave Skow · Answer

@Thomas Hall- thanks -   1) if considering buying another  " primary residence " to purchase  - 1) consider / check how long you need to  reside in present  home  ( it may be a year)  2)  get formally  pre approved  ( assuming you need financing ) for whatever  hypotehtical  scenario you  want to use for the  2nd property  in order to make sure you can  qualify and also so you become  familair with the present  numbers  ( payment / rate /  cash needed to close etc )

Brian DeLuca · Answer

Who offers these loans? I never seen anyone offer 5% down if they are not a first time home buyer. Please tell me more because I will be running out of my va entitlement after I aquire my next property

Andrew Duna · Answer

Hi Brian - this is a owner occupied conventional loan. FHA is 3.5% down

One successful house hack down - whats next?

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