Is House Hacking To Early Retirement A Viable Strategy?

[Raheem Jamaal]

So as I read, watch videos, and listen to BP Podcast more and more on the topic of REI, I've decided to begin planning for early retirement. I'm 24 and currently I'm going through training to become an HVAC technician. Which in my area, an HVAC technician's salary is between 35 and 40 thousand dollars a year. Which I should have the funds and proof of income to put down for my first property in the 150 thousand dollar range with an FHA loan; if I understand correctly. So here is where you guys come in. I need to figure out if this strategy that I'm about to discuss with you all is legitimate to retire early.

Alright, so I save my money up and find a killer deal on a duplex, triplex, or fourplex; my plan is to house hack my way to an early retirement. With that said, once I buy my first cash flow positive property and live in it a year or however long it is to be able to move with an FHA loan, I want to lather, rinse, and repeat until I've built up a portfolio of around 100 thousand dollars or approximately 8,333 dollars a month so I can travel and basically do what I want. What I'm having trouble with is the necessary steps to take once I've bought my first property and want to move on to my second, third, and fourth.

I need to know who I need on my team from the beginning and who to talk too to find good deals in the top markets. I'm just about willing to move anywhere in the top markets (except Florida it's just too damn hot and humid there. Haha.) So any advice or tools would be greatly appreciated and I will continue to keep everybody posted on BP of my progress. 

EDIT: Just realized that I couldn't retire early this way because I would have to live in a unit for a year and then repeat this process again every year. PLEASE. If you know of a better system and strategy to take for my goals, PLEASE, chime in. After watching this video I realized that I have to do some tweaking to this strategy. I just don't know what I should do. Here's the breakdown.

$100,000 a year

or approximately $8,333 a month

56 units at $150 a door would be exactly $8,400 a month.

1. Year— 5 units
2. Years— 10 units
3. Years— 11 units
4. Years— 15 units
5. Years— 15 units

[Alexander Stephenson]

Hello Raheem,
I'm still in the learning phase too so take what I say with a grain of salt. FHA loans are finicky in that you are only ever allowed to possess one at a time. So moving out after one year and doing it again is viable, however, you'll need to either refi your current plex into a conventional loan in order to do another FHA, or you can just go get another conventional.
I would argue that a great option for you would be to find an undervalued pled that needs a little bit of work. FHA loan this plex (or 203k if you need repair money) and put some sweat equity in to the place. This will allow you to refi and hopefully get your cash out of your first place to put into your second.
You're also going to have trouble getting past 16 units with this plan because a lot of banks stop handing out mortgages at 4. This means you should find another option, such as a small community bank that allows more than 4 mortgages, to fund later deals. Start building that relationship early.
A final thing to consider that goes along with the aforementioned point is that paying off your mortgages is inefficient when you are as young as we are. If you can leverage 10 properties for the same amount of money as owning 2 you'll be paying more into your equity, you should have more cash flow although it will be lower per unit due to mortgage, and if one property turns out vacant you have 9 others versus one other.
Let me know if this was helpful with an upvote!

[Arpan Patel]

Those numbers can work but I agree about the lending being different after you have exhausted your FHA loans. Also, I think 100 a month positive cashflow is more realistic which would put you at 84 units. Few different ways to get there and your set up approach to the units can still work just with different amounts. Maybe take down a 168 unit complex and split with an investor if you manage it. Probably too big to bite the first year but in year 3 or 4 after you have some management experience and the ability to turn assets around, maybe start taking chunks off at a time. Hope this was helpful!

[Raheem Jamaal]

Thanks for the advice @Arpan Patel and @Alexander Stephenson! Still have to work kinks out of this strategy because I have no idea how conventional loans work or what I'd need so definitely have to figure all that out and Arpan, I wouldn't even know where to begin with commercial real estate. That's an entirely different ball game and set of rules, but a good strategy nonetheless. Maybe if I do a plex with an FHA Loan for my first deal, buy below market value, have some built in equity, do the owner occupied thing, rent the other side out, live in it for a year, do a cash out refi after that year is up, and hopefully I'll have some credit built up by then cause currently I have no credit history. After that I have no idea where to go from there. I still have a lot to learn as far as getting past the first property is concerned, but at least I have a dollar figure of how much I want to cash flow annually before I retire from being an HVAC Technician. Also I need a solid team behind me if I want this to work which I don't know where to start with that either. I guess I just have to take a step at a time.

Thanks again you guys!

[Roger Poole]

I guess the real question is what do you think is a early retirement? 35? 45? Is your properties your plan to be a primary income stream for the next 50 years?

[Raheem Jamaal]

Hey, @Roger Poole! Just ran some numbers talked to a friend of mine that referred me to this video and this really put things into perspective for me! Been watching Clayton Morris' videos all night and he has me convinced that SFR may be the best strategy for me. I would like to retire by the time I'm 35, but technically I could retire in 3 years and just be a full time real estate investor.

I'm going to link my next thread post into this reply so you can see exactly what I did to calculate my retirement numbers or as Clayton Morris likes to call it the 'Freedom Number'. Also, yes, that will be my primary income stream until I pass away.

[Raheem Jamaal]

Link to my latest thread post.

[Roger Poole]

Im just getting started like you but Im on the other side of the coin. Im not looking for REI to be my golden ticket just a foundation tool. Its very possible to make it happen just run your numbers then run them again. Good luck on your journey

[Kelsey Breedlove]

What if you paid extra on your houses to cut the mortgages down to 15 years. Even if you did this on just a few of them (maybe 1/3), then you would really up your cash flow in only 15 years!