Brrrr/house hack 4 unit 5% Down how’s it work?

[Nick Tebo]

I’m 21, Real estate agent, In central massachusetts, working on getting down payment/repair cash. Plan on buying a 4 unit within next 6-8 months. My goal is to Brrrr/house hack from 4 unit at 5% down to 3 unit 5% down, 2 unit 5% down because my understanding is the bank looks at it as an upgrade of living so allows a lower down payment. (Please correct me if wrong) and then plan on going back up to 4-8 unit depending on deals at 20-25% down with out moving In. My goal is to maximize my money and Brrrr my way up to as many units as possible going in too bigger and bigger deals as I go. Who’s out here doing this? Is it possible?

[Brad Cornell]

Hey @Nick Tebo my wife and I live in Minnesota and just did exactly what you're talking about. We purchased/house hacked a 4 unit property for about $238K using a 5% down loan and are now rehabbing each unit one at a time and then filling them with good tenants as they are finished. We currently have 2 units done and rented and are working on the last two units, one of which we occupy. We are planning on doing the same thing with the refinance because once this thing is filled and we can show stabilized and increased NOI it should appraise for about $335K.

If you don't have a killer income the two best things you can do to gain more units quickly are to increase income/decrease expenses, and second begin to build a reputation with investors and future partners.  

We've been working really hard to increase our income/decrease expenses and one of the ways we did that was to house hack this thing which is now adding $1380 of extra income and we're only two units in.  I believe for long term success this is key, so in regard to income I'd focus on killing it as a Realtor and generating as much income as you can.

Secondly, the rate at which you will be able to accumulate more properties will be directly proportionate to how fast you build credibility and your network.  If you're really wanting to scale and don't have the income to back it up, because BRRRR's take some time, you'll need to begin building a network of investors/partners.  This is done through networking, adding value to their lives, and building credibility.  We've been doing this for about six months now and at first our investors were a little sketched out by our age and the idea of what we wanted to do.  But I will say that as they have seen us make the progress we have on this property and fill it with quality tenants so quickly the credibility we have is increasing.  I just met with an investor yesterday and he said for the first time that "he knows enough people that we could comfortably raise $250K."  He never would have said that 12 months ago when I initially started talking to him about REI.

So because I'm about 12 months ahead of you that would be my advise.  Definitely go for the BRRRR but dont forget about income/expenses and building that network.