House Hacking vs. Single Family & Turnkeys

[Art Maydan]

So here's my situation: I'm 23 and my wife's 21. I hate my job and my chosen career path with the passion of a thousand suns and have decided real estate is how I'm getting out of it. My wife's about to graduate and has accepted a job as a teacher, which is something she does want to do. I'm pre-approved to buy a house with FHA, but my approval limit is very low because of how little I make ($210K for a 2-unit up to $320K for a 4-unit).

We need to have a Chicago address by August in order for my wife to be a teacher here. We’re having a hard time finding multi-units to house hack that are in our price range and are also in decent areas. Here are the options I see:

-Buy a single family home here in my name, live there for a year, then buy a nicer multi-unit with FHA in my wife's name in a year, house hack it, and rent the single family. Pivot from there.

-Keep looking for a multi-family that fits our criteria. This is riskier since it’s April and we need to be in the house by August.

-Buy a single family home and use turnkeys to invest in real estate. I won’t be able to afford a conventional down payment on anything decent in Chicago for a while. But I could probably swing a new single family in Ohio a couple times a year.

I’m only interested in buy-and-hold (for now) and I’m not interested in investing or living in the ghetto or dealing with Section 8.

In Summary:

Short Term Goal: Own a home in Chicago

Medium Term Goal: Quit my job

Long Term Goal: Become financially independent using cash-flowing real estate

Am I missing anything? Which route would you take in my shoes?

[Alex Brookbank]

@Art Maydan Your first sentence made me laugh. I can relate.

I'm biased to house-hacking multifamily properties because that is what I did. Turnkey is the most hands off, while single family is the easiest model to learn/operate. I think your plan makes sense.

If your long term goal is freedom, than it's probably easier to make it by staying local (maintain control) and digging into the local market, just my take. Turn key investing with single family houses seems to make sense if you have extra cash, don't want headaches (in theory), and want to invest in real estate. I think your COC returns will be capped, whereas, if you are doing buy and holds, and can find solid deals and manage yourself, you can reach 25-40% returns. If they need a little work, or you can upgrade your tenant profile.

Another thought is to buy a single family now with 5 or 10 down, then a little later buy a multifamily to house hack with an FHA loan. Then rent your single family.

This is what I did:

Property 1: FHA Duplex (house hack) 3.5% down

Property 2: 20% down owner occupied triplex

Property 3: Sold property 1 to purchase 4 unit with 25% down

Property 4: Re-using FHA loan with a 5% or 10% down payment

This manuevuring of the pieces has put us in a position where we started with little cash and now my wife and I are saving a serious chunk of change every month (no kids, dual incomes .... she's a teacher too, btw :) ).