Newly Built Home HouseHack?

Question

Hey guys need your opinions and thoughts! For my people who are house hacking, is it a good idea to house hack a newly built home? The market I’m in Austin TX is really competitive when it comes to Real estate, so I’m trying to get creative as possible. I’m thinking about purchasing a newly built home for 230-240k and renting out two of the rooms. I ran the numbers, and if I can get 600-700 a room (is this realistic?) I would only be paying 400 or less for my mortgage a month. The home is in a great area and there is a lot of potential in terms of resale value. It’ would be my first deal so I need advice on what to do! I’ve been looking for the perfect deal for 6 months but have not came across that deal. Any house hackers getting a profit from house hacking a SFH? Thoughts?

Corby Goade · Answer

Great advice above, but the real key in a market like Austin is the equity. If you can reduce your personal liability on the mortgage to $400 per month and that is acceptable to you, then that is great. That being said- the goal is to, at some point, move out, have this property cash flow AND provide a chunk of equity that you can move in to a new investment.

When you eventually move out, would this property at least pay the mortgage and maintenance costs as a SFR? You aren't going to want to rent out separate rooms to different tenants if you aren't living there, and those numbers will likely look different.

The Austin market is similar in profile to mine and building fast and reliable equity can be a great way to get started in REI, you just need a plan.

Best of luck!

Jerry Stevenson · Answer

@Jaysen Medhurst Thanks for the advice, it’s much appreciated! Yes I considered Multifamily, but have yet to find a deal in my price range in the Austin market. Yes I’ve been educating and learning everyday, I have a decent understanding on how to do a rental analysis (any tips or advice is much appreciated though). My goal is to use a conventional loan with 5% down, and once I get to 20% equity the PMI will go away. What strategies can I use to find a deal off market? I’ve tried Driving for dollars, nothing thus far. Once again, I really appreciate your insight and advice!

Jerry Stevenson · Answer

@Corby Goade Thanks for the advice! From my understanding and analysis, the property would break even or give me roughly 60-70 bucks a month. if I rented it out after two years of house hacking. Then again I’m a newbie to REI so my calculations could be a little off.

Jerry Stevenson · Answer

@Bill Goodland Thanks Bill!! Sound advice!

Bill Goodland · Answer

@Jerry Stevenson I would say go for it if you haven’t found anything else that’s better. I would personally recommend using a conventional mortgage 5% down and saving an FHA for if you ever come across a bigger small multifamily. Key is equity in an expensive market like previously stated. If you can add value through a simple paint and flooring rehab, then great, but if you’re going to buy turnkey, it might as well be new. My only advice would be if your strategy is going to be rent by the room, I would look for 4 or 5 bedrooms if you can

Jerry Stevenson · Answer

@Jordan Moorhead Yes 1-2-10 warranty.

Jordan Moorhead · Answer

@Jerry Stevenson newly built just means you don't have to worry about capex for a while so if the numbers work go for it! Do you know what type of warranties the builder has on the place?

Jaysen Medhurst · Answer

@Jerry Stevenson, there are lots of good resource here on BP about analyzing rental properties. Check out the webinars to start. If you share your analysis, I'm happy to take a look.

Your financing strategy is a good one. That's what I'd do. Maybe you can combine that with a live-in BRRRR where you create some value and get to that 20% much sooner.

Jaysen Medhurst · Answer

I'm no expert in the Austin market, @Jerry Stevenson, but I am also in a HCOL area. I would say it's nearly impossible to profit with a house hack in areas like ours. If you can lower your living expenses, build some equity, and gain land lording experience, that's a win.

A few other thoughts:

• Have you considered MFR? That would give you flexibility and is more reasonable to manage once you've had enough of house-hacking yourself.
• There are many more expenses than just the mortgage: Insurance, taxes (very high in TX), Vacancy, Repairs, CapEx, Lawn care, Management. Plus with a house-hack you often cover all the utilities. Make sure you learn how to do a detailed rental analysis.
• How are you going to finance? I'm assuming a low-down payment mortgage. This is great at the beginning, since you can get into the property with less money out of pocket. Just remember that higher leverage means a bigger mortgage each month, plus you'll be paying PMI.
• 6 months is not very long. Persistence and patience are key. Have you tried to find anything off market?

Jerry Stevenson · Answer

@Jaysen Medhurst Thanks!

Newly Built Home HouseHack?

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