House Hacking During Pandemic: Is it a Good Idea?

Question

House hacking has always been an investing strategy that has appealed to me. Buy a single or 1-4 unit multifamily home with a low down payment FHA loan, add some forced appreciation, and live with little to no housing expenses by living in one unit and renting out the others. I just sold my first fix and flip and am looking to house hack as my next investing strategy. My questions for the bigger pockets community are:

- Is now the best time to house hack considering the current economic environment due to the Pandemic?
- Any words of wisdom from any fellow house hackers that has pursued this strategy (i.e. learning lessons, testimonials, etc)?

I'm currently reading the bigger pockets book "The House Hacking Strategy" and have begun my search for multifamily homes and lenders that do FHA loans in my area. My goal is to potentially move-in to this house hack before the end of the year.

Jake King Roberts · Answer

Hey @Cyle Harris.My fiance and I closed on a 2 unit duplex on February 18 this year... So you can imagine what we were thinking when all this started hitting the fan. We immediately went to work painting the front unit and replacing the floors as we wanted to have it rented out by the end April. Luckily we were still able to be socially distant when showing the place and we found a renter. Our market (St Pete, FL) is pretty hot as far as housing so obviously it will vary depending on your market. What I can say is whether or not you househack - be very thorough with screening tenants. I know this kinda goes without saying, but we saved a lot of heartache by telling them our requirements (income is 3x more than rent, Good Credit, Background check, no smoking in the house, etc.) over the phone and again when showing the house. This really sifted through the people that may not fit your ideal tenant. Although this may delay getting someone in the househack/SFH, it is well worth it.

Brandon Dumbuya · Answer

@Cyle HarrisI think house hacking now is still a viable strategy depending on how renting is going in your specific market, especially since you'd be doing a mf property and largely avoiding contact with tenants. If you were to go with a roommate situation, I don't see how it would be riskier than any other living situation with roommates. That being said, the mf option will likely work better. I wouldn't say now is the best time to house hack but if you come across a good deal, I wouldn't write it off either.I'm closing on my first house hack in a couple of weeks (4 bedroom ranch with a 2/2 detached guest house I'll occupy) so the jury's still out on whether or not it will be more difficult to find renters. However, my income is stable and my expenses are miniscule compared to what I make so I'm comfortable paying the mortgage the first year if push comes to shove (Although, people in my circle have already expressed interest in renting once I close). The piece of advice I'd give you is the same advice someone who house hacked before me gave me: Make sure you can afford the mortgage outright, especially given the current situation.I'm using a Fannie Mae HomesStyle loan that requires 5% down but has fewer property requirements than FHA but does allow for renovation costs and has no requirement to occupy the property. The down payment does jump to 15% for an actual mf property though (My property is categorized as single family with an ADU).Feel free to ask me any questions. I'm still learning myself but would be happy to share my experiences so far.

Cyle Harris · Answer

@Brandon Dumbuya Thanks for your input and congrats on coming close to closing on your first house hack! I look forward to reading how everything turns out in a future post. It's reassuring that a lot of what you've suggested align with the research I've conducted so far. @Jake King Roberts Congrats on finding a renter for your first house hack! I know this was no easy task considering the environment we're in. I can imagine screening tenants becomes even more critical when house hacking as these people will be your neighbors (or roommates if you have a single family home). Thanks for the input!

Cyle Harris · Answer

Thanks @Moises R Cosme! I was planning on doing the less aggressive house hacking strategy from the beginning (buying a multifamily home, living in one unit and renting the rest) as I'm not a big fan of having roommates again. Have you ever "house hacked" before? If so, how was your experience?

Moises R Cosme · Answer

I would NOT house hack at this time; the potential risk outweighs the marginal benefit you would get. Wait until we are clear of the pandemic, once we are then pursue the strategy. In the meantime purchasing a 3 family with an FHA loan is a great plan, you can live in one unit & rent out the others... After two years you will be eligible as a first time home buyer again. Look for another 3 family, and repeat the process. Almost all lenders offer FHA (it is the most popular mortgage program out there). Try Rocketmortgage out - it offers the simplest platform to apply and complete a mortgage. I hope this helps!!!