House Hacking in High Priced Markets

House Hacking in High Priced Markets

Member since 2023 · 1 post · 0 votes

Hello everyone, I live in New Hampshire and work my full time job here. I have recently been in contact with a real estate agent and a lender. My real estate agent has a few investment properties, so his advice is pretty helpful. My lender also deals a bit in BRRR with his clients. I have been approved for a $425,000 to $500,000 loan 2-4 units (It does depend on what the income of the rents are) at 7%. I currently have about $25,000 saved up for the down payment. The issue is when it comes to saving 10% to 16% up for the down payment (I am using a FHA), closing costs, title fees, and other stuff. Rents in the area depending on the house are about $1,500 to $2,500, depending on the quality on the inside.

My main question and concerns for all this, 

to get the rest of the 10% should I look into partnerships? 

I am also looking into trying to find off market deals (For example, Facebook, craigslist, etc). How difficult is it to find off market deals for a first property?

If people have an other advice or anything else, I would be happy to discuss and learn a lot about everything. I am pretty new to everything. I currently make a lot of money from my full time job and I am not looking to move states.

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Investor · MA · Member since 2014 · 164 posts · 114 votes
3y

Our first few "house hacks" were single family homes where we did 2-year live-flips (no taxes to pay on sale). Could look for a SFR with space for an ADU or Airbnb. Off market is tough unless you're doing direct marketing yourself— most wholesale deals I see are garbage. Keep working, saving and learning— real estate isn't get rich quick, have to play the long game.

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  • Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    3y

    Your down payment would be 3.5%. At 500K that is 17.5K, that should leave you enough. On the closing costs you might be able to ask the seller to pay that so you don't have to worry about it. Ask the lender for a preliminary breakdown of closing costs. For properties you would most likely be looking on the MLS, finding a multi to house hack is overall tough. The inventory is tight so you'll need to be patient unless you open up your search to single families. With house hacking being so popular on social media everyone is looking to do it.

  • Investor · MA · Member since 2014 · 164 posts · 114 votes
    3y

    Our first few "house hacks" were single family homes where we did 2-year live-flips (no taxes to pay on sale). Could look for a SFR with space for an ADU or Airbnb. Off market is tough unless you're doing direct marketing yourself— most wholesale deals I see are garbage. Keep working, saving and learning— real estate isn't get rich quick, have to play the long game.

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    If you make a lot of money in your current job, then sit down and go through your finances to see where you can cut your expenses to save for the down payment. As Will said, start smaller and move up.  Perhaps start with a duplex, live in the unit that needs the most work, fix it up, then move to the other unit and do the same.  Then start saving and looking for your next place to buy and rent out both of the units.

  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Joe Herrmann

    Just because you can afford a $400-$500k home does not mean you red to buy at that price point. Typically people overstretch on their first home - it’s not your forever home so find something you can afford, learn how to be a homeowner and if you can house hack it even better.

    Remember house hacking a one bedroom in a $$350k house vs $500k house will provide better numbers for you.

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  • Patrick McCannPro Member
    Realtor · NH · Member since 2022 · 113 posts · 59 votes
    3y

    Hi Joe, 

    I purchased a duplex in NH with a FHA to house househack in December. Not sure a partnership would really work on an FHA unless the money came from a family member. Also off market in NH is competitive right now so could be very challenging to find something that wouldn't need significant work off market, many investors spending a lot of money on mailers, leads, and marketing. Have you looked into FHA 203k loans at all yet? It's basically an FHA with construction cost rolled into the loan. Don't be discouraged. I'm not a high income earner, been paying child support since I was 19 and I was able to purchase a duplex for 444,000 and have my downstairs unit rented at 2,300 with great tenants

  • Jaylan ArcherBusiness Member
    Real Estate Agent · Portsmouth, NH · Member since 2014 · 150 posts · 65 votes
    3y

    Hey Joe!

    Congrats on starting the journey into investment property. I'm glad to hear you are working with an agent experienced in rental properties. Unfortunately many agents out there don't understand the dynamics with multi-family property.

    Like others have mentioned - I would definitely go with the FHA, 3.5% route. That is by far the best way to get started in small multi family properties by owner occupying. I have found that typically the more units 3 or 4 the better in regards to cashflow using this method.

    It's still a really strong sellers market in Maine and NH in just about all markets. You are going to struggle finding great rental properties that you are the only buyer offering on so getting your closing costs covered might be a tough thing to do. If you are able to find something off market that is likely the best option but also will take the most time.

    I have had a lot of success sending out mailers, door knocking and looking up sellers on properties I knew I was interested in buying or had a buyer for. By far - the most important property an investor can buy is the first one. I always recommend a buyer wait on the good deals to find a great deal. 

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  • Realtor · Keene, NH · Member since 2018 · 38 posts · 14 votes
    3y

    Hi @Joe Herrmann, I am a bit confused on why you are trying to save 10-16% of the purchase price if you are stating that you are using an FHA loan? Usually to roughly run numbers, take the 3.5% down payment and then another 3.5% for closing costs, so that 7%. I understand that you probably want to have some savings/reserves but I just don't see why 10-16% specifically.

    To answer the partnership question, I don't think you would really be able to do that route if you are going FHA because that means it is your primary residence.

    As far as the off market deals, this is hard, costs money, and is time consuming. Unless you have to time to put into it I think your best bet is finding an investor friendly agent that works on getting those and they could be your connection for that type of deal.

    All this being said, I am not sure what part of NH you are in but like others have mentioned the market is very competitive right now and can be challenging for someone using an FHA loan to get a multifamily under contract. Not impossible though.

    If you have any questions that I could help with feel free to shoot me a message. I also have a 3 unit building in Dublin, NH that could possibly work for you. 

  • Columbus, OH · Member since 2023 · 427 posts · 254 votes
    3y

    I would either look elsewhere for funding or keep working and saving money, do not underestimate the amount of cash reserves needed to own and operate 2-4 units, especially if cosmetic rehab is needed. 

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