House Hacking vs. Not Hacking

[Justin Wotton]

Hi All,

I'm still trying to learn what I can about Real Estate and was looking into doing a house hack. I know this is the way I would like to go but given my current situation I may not be able to move. So, I'm basically wondering what's the difference in terms of cost between house hacking and just buying and renting a multi-family. I think it would disqualify me from getting an FHA loan but I wasn't sure what some of the other drawbacks were? Would it be worth waiting until I'm able to move and house hack?

Thanks,

Justin

[John Warren]

@Justin Wotton the obvious difference is that your have to put a lot more down to buy a property as a pure investment. Typically 20-25% down. The advantage, though, is you can focus on the property purely as an investment without thinking about all the things you want in the property. For instance, a yard may not bring you more income over the long run, but many house hackers also want a white picket fence. 

House hacking is a good strategy as it gives you a bit of a cheat code. The 5% down conventional loan in particular is an incredible tool if used as an opening move for novice investors. A lot of folks who work with our brokerage in Chicago do a house hack as their first and second deals before moving on to the 25% down world of investing.