Lease is up in 6 months. Time to house hack, right?

[Zachary D.]

9 Months ago I finally got back to the US after living in Japan for 6 years and almost coming back once. My current apartment lease is up in January '19 and my first US job in ages will have it's one year anniversary in October '18.So, fall / winter is my first big chance to make the transition to investor.

"I'm throwing away money by renting."

This a primary force in my motivation. I pay 930 a month in rent and another year of renting makes me feel new kinds of anger inside. I gotta get equity!

So I am currently ranking options to ensure I don't waste another 11k or so.

1. Buy a single room condominium, rather than rent. 

- It would cost less than rent after a down payment be rentable when we can finally get an multifamily property.

2. Buy a single family home. 

- We could rent out one room ( not a fun idea for us ) and of course rent the house later.

3. Duplex, Triplex, or Fourplex.

- Every door is another leg to stand on and can withstand some vacancy or my loss of work, should that happen. An FHA loan would result in a higher payment, but would allow me to start, regardless. Also, multi family in Tarrant County seems to be in fairly rough areas.

And so, my general line of thinking is that if I cannot find a livable live-in investment, I'll go for something like a small condominium that will result in likely savings over our current apartment and gain equity. 

If anyone out there would like to voice their opinion about the opportunity cost involved in building more savings while renting another year or forgetting options one and two altogether, I'm open to it.

[André Anderson]

Hi Zachary,

Love the analysis and your logic on this. Being a multifamily and house-hacking investor myself I would naturally recommend doing your best to make a multifamily property work for you to decrease the financial burden of housing costs and accelerate your savings to funnel into further investments.

Even in rougher parts, if you are looking for neighborhoods in transition you will likely experience better returns over the long run, and you could interact with the direct neighbors to get the feel for that particular block and how the area is. Obviously if safety is a concern, don't go there! If you can find something and improve to livable with an FHA 203k loan, even better (depending on how comfortable you are with non-turnkey deals). This may require more time/due diligence but will ultimately be more worth it.

If you didn't go multifamily and sharing space in a SFH is a bother, you could look for a value-add opportunity SFH which may allow for conversion to duplex (requires market research and working with city), or a layout which may give a more separated feeling (like mother-in law suite, etc.) and apply the house-hacking concepts to this.

Don't rush yourself into a bad deal, but I would say getting in when your passion is building for real estate and you feel the time is right to take action and execute. If building savings and money is an issue, look for local grants or programs for first-time homebuyers that you can also use for multifamily.  Something I had used was Down Payment Assistance to leverage as much as possible so I could have a little more reserves, and I generally was comfortable with having that amount of leverage.  Definitely weigh the pros & cons of your situation and take action accordingly. The opportunity cost of building savings and paying rent is too high (in my mind) espeically when you consider the swing in savings, building equity with OPM, tax benefits like depreciation, and if you did your research right, gaining natural or forced appreciation.

You have quite a bit of time until your lease ends, so take advantage of it!