House Hacking with a New Construction?

[Raymond L.]

Market: Saint Louis, MO.

Hello everyone. My name is Ray. I am not a Real Estate Investor per se but as a Reddit /r/PersonalFinance kinda guy, I figure I should learn more about housing too :-)

1 year after getting my first post-college "real" job that is in my field, I bought a cheap condo just to live in, 5% down with my credit union. I've always had roommates before that so I found a roommate to live with me in the condo too, didn't even put too much thought to it, just spilt the mortgage dollars amount + utility in half with the roomie as if I am still renting.  

Anyhow - I moved to STL 1 year-ish year ago for a new job, sold the condo, made a 40% gain from appreciation after holding it for 3 years. Guess that was me accidentally getting into REI without knowing it?

I've read up on the different methods and calculators listed in the FAQ post, I've read up on this Startup forums too. I know operation at scale with multiple property is a complex operation that needs careful research and balancing. But for some reason even the house hacking posts contains a lot of calculation of CF, Cash on Cash Returns etc - sound like a lot more complicated than my experience with the condo and what I am imagining? 

I am looking at buying a house here in STL, primarily as primary residence, but also plan on having roommates / house hacking.

Reading the forums here, usually the recommendations for first time house hacker is to buy a duplex. But almost all the duplexes/4-plex on the market here in STL are very old housing stock. Many times when investors bought them it's to gut rehab them and converting them into Single Family / a Side by Side townhouse.

Condos here don't sell. (Seriously look up 63101). With the low inventory on the market, I start looking at New Constructions. I am looking at a new 3br/2.5ba house that is ~$390K, and I think it makes a lot of sense for my purposes for me. 

I have two questions: 

1) Do people do that - House hacking with new construction?

2) Should I finish the basement as part of the new construction? Builder's quote for finishing basement with Living area + 1 bedroom + 1 full bath is close to $100/sq ft, separate entrance with stairs possible but cost extra.

The basics:

$390K purchase price

10% down conventional, 30 Years Fixed. Aimloan.com is quoting 2.654% APR, no points, monthly PMI.

~ PITI (assuming 0.5% home value for home insurance) for the first 10 years is $1646/mo. After the 10 years abatement runs out, add Property tax ~1% home value/year

From my perspective it makes a lot of sense. I can probably find 2 roommates paying $650/mo not too difficult (house is walking distance to local university + hospitals).

I will then be only paying $1650-$650-$650 = $350/mo to live in nice brand new house (at least during the first 10 years). It seems better to me than starting with a duplex?

2) 

Should I finish the basement as part of the new construction? Builder's quote for finishing basement for Living area + 1 bedroom + 1 full bath is close to $100/sq ft, separate entrance with stairs possible but cost extra. Some post here suggest by finishing the basement, the homeowner can rent out all the up stairs rooms and moved into the basement, but that sounds fairly extreme to me? As in - why did I work so hard to to get into a decent paying career and having a professional job and only to come home to a basement apartment like when I was still working in retail? With the low housing cost, I can live nice and still take care of my future by maxing out 401K/IRA/HSA/taxables with index funds and call it a day?

If this post comes across differently than the expectations for the Starting Out forum, I thank you for your patience. Would love to hear your take. 

- Ray