House Hack: Single Family vs Multifamily (Duplex)

[Victoria Radcliff]

I am finally ready for my first House Hack! What in your professional opinion what tends to get a better return a Single family (rent by room) or a Duplex with renting out one of the two units? 150,000 is my max price what the best use of that money. 

If Duplex where are you looking to find them?

If Single Family what do you look in the home that works for a rent by room?

[Anthony Angotti]

@Victoria Radcliff

In Pittsburgh there isn't a huge market for rent by the room type arrangements unless you are in certain neighborhoods. So I think the duplex route is far superior. 

Additionally when you eventually move out you aren't left with an awkward situation of housing all those people who potentially don't know each other in different rooms. For that reason, if you plan to do the single family house hack in the Pittsburgh market I would line up some friends that are willing to rent from you. And analyze the property as a single family rental and not consider the house hack numbers for purchase. 

I also like the duplex because you can combine both strategies. You can always rent your own unit by the room, but then when you move out you're left with a multifamily rental, which I prefer over single family for a variety of reasons that I won't go into this post since they are discussed elsewhere on the site. 

Additionally by house hacking you are able to get into a B/A class area with low cash down. Even though prices have gone up since you have such little money out of pocket your long term ROI is going to be a lot better than buying single family home in a C class area or a multi in a C class area. Since single family homes to rent by the room are going to be straight unaffordable for investment in the nicer areas unless you buy distressed assets. I do all of my house hack duplexes in nice areas (on my third one now) because they allow me to buy buildings in areas I otherwise couldn't afford. Cash flow is less than if I bought in C class areas, and I sometimes have a few hundred dollars out of pocket while living there, but long term my value appreciation, rent appreciation, quality of tenants, and other wealth generation levers are going to be much better in the higher value area. And for 3.5% down on a FHA mortgage, the ROI is incredible.