Best type of Property to House Hack for first time home buyers - Duplexes?

[Julien Jeannot]

Curious on your opinions.

I've started my journey in the expensive Seattle market and found house hacking a duplex gave me a tremendous boost as my first property.

The top 10 advantages that played out quite well:

1. Built-In Income Stream: Investing in a duplex allowed to generate rental income from day one. By renting out one unit, I covered a significant portion of my mortgage, reducing my monthly housing expenses and easing financial pressure.

2. Cost-Effective Entry: Buying a duplex often requires a lower down payment compared to purchasing a multifamily property (5+). This makes it a more accessible option for first-time buyers with limited funds

3. Equity Building: As you pay down your mortgage using rental income, you're simultaneously building equity in the property. Over time, this can potentially lead to significant wealth accumulation. 

4. Property Management Experience: Living on-site game me a chance to learn about property management firsthand. I develop valuable skills in tenant relations, maintenance, and repairs that can be applied to future investments.

5. Loan Qualification: Rental income from one unit can strengthened myr loan qualification when applying for a mortgage. This enhanced financial profile may lead to better loan terms and lower interest rates.

6. Flexibility for Future Moves: When I decided to move out later, I can continue renting both units, creating a consistent income stream even after transitioning to a new home. When 1 unit was vacant, the other supported the drop in rental income.

7. Tax Benefits: Real estate investment offers various tax advantages. I deducted property-related expenses, such as mortgage interest, property taxes, and maintenance costs, from my taxable income. I have not done a cost segregation yet, but a tempting option.

8. Appreciation Potential: Historically, real estate properties tend to appreciate over time. By owning a duplex, you have the opportunity to benefit from potential property value appreciation, further boosting your investment. In my market the appreciation for that property over 6.5 years averaged out well above 10%.

9. Reduced Living Costs: House hacking allowed me to live in a larger or more desirable property than I could afford at the time solely on my income. By sharing housing costs with tenants, I enjoyed better living conditions at a lower price.

10. Long-Term Wealth Creation: Owning a duplex can be a stepping stone toward a more extensive real estate portfolio. The experience gained and the equity built can set the stage for future investments and a secure financial future. I BRRRR into my next property and the attached HELOC provides me with a great source of flexible capital.

[Julio Gonzalez]

Great post. Thanks for sharing!

[Michael Smythe]

2-4 unit is probably better than roommate hacking due to separation of "friends" from business.

[Dave Spooner]

Love it! You can learn so much from house-hacking!

[Benjamin Sulka]

Julien, 

Are you willing to share any details about BRRRRing from your house hack to your next property? 

This post really shows the huge benefits of house hacking even if you aren't necessarily cashflowing. Reduced living expenses, onsite landlord experience, equity building, and more. 

[Julien Jeannot]

@Benjamin Sulka Sure, what would you like to know?

[Benjamin Sulka]

Quote from @Julien Jeannot:

@Benjamin Sulka Sure, what would you like to know?

The two biggest parts of the BRRRR strategy that I lack knowledge of are the rehab and refinance portions.

What types of rehabs did you make for your duplex house hack? Were they mostly cosmetic rehabs or was there anything big you needed to do at the outset? 

In terms of refinancing, did you pay a fee for refinancing? How long did it take you before you were able to refinance? Was it after you had a certain amount of equity in the property? 

Thanks so much. 

Ben

[Julien Jeannot]

@Benjamin Sulka

This one was mostly cosmetic: paint, carpet/floors, light fixtures, trim, landscape clean up, rodent remediation, bathroom vanities in the 1/2 baths, and some of the windows.

Rehabbed one unit at the time aside from the windows. The process took 2-3 years, I was not in a hurry, busy with my corporate career and rather cash strapped.

I forget the refinancing fee, but it was minimal. This refi strategy was to reduce the rate and improve cash flow. Looking back, I should have refied to pull cash out before the interest rate skyrocked since the rent increases could have supported it. I believe I refied a couple years after purchase.

[Michael Smythies]

Hi Julien, 

Great post! Thanks for sharing. 

Out of curiosity, you mentioned gaining property management experience while living on-site. What were some of the most valuable lessons you learned in tenant relations, maintenance, and repairs during this time?

[Julien Jeannot]

@Michael Smythies

The biggest lesson is the wild and ever changing landlord tenant laws.

To your area of interest:

- Tenant relations: Keep it business, stick to the lease agreement, communicate, and the golden rule. Be honest they'll figure out you are owner eventually, after all the information is public, best to start the relationship on solid ground.

- Maintenance & Repairs: act quickly on any request, use the opportunity to upgrade, set expectations for the common areas. Figures out a lot of my tenants are quite handy and more then happy to upgrade the place on their own with fair compensation. Win - win all around.

[Carlos Scarpero]

Thanks for sharing

[Mike Dymski]

Quote from @Carlos Scarpero:

Thanks for sharing

@Carlos Scarperostop spamming the forums.  You are replying to old threads and the feed is full of your spam.  You have 1 vote for every 10 posts.