House hacking questions for the minneapolis minnesota area

[Alex Winder]

Greetings fellow real estate investors. Today I have a question regarding house hacking in the twin cities/minneapolis area. A little background about me, I have been saving money for a house for a few years now and have around 26k sitting in the bank diligently growing every month. I live at home with my parents and would like to be moving out in the not so distant future, but I do enjoy my parents and the ability to save around 50% of my income every month. As of recently I have been informed by one of my good friends that 2 possibly 3 of our other friends are looking to get a place together, some of us or a couple of us nothing certain yet. All of my friends know that I have been saving for a house for a while now and have mentioned that if I were to buy a house that they would be interested in living with me as a renter. I recently was informed that all of these people or some of them were wanting to live together seeing as we are good friends and get along together well. What I am thinking in the realm of possibilities is buying a single family home in the eagan, burnsville, savage, apple valley, rosemount, farmington area, seeing as most of us work and frequent that general area of the suburbs. I was thinking something around 170-200k range that has at least 4 if not 5 bedrooms that needs a little bit of work that I can get for below market value. After purchasing have 3 or 4 roommates depending on the size of my house that I find in the area. At the end of the day best case scenario would be to live for close to free or possibly cash flow a little bit while having my mortgage covered every month. I really like the possibilities in this case seeing as they are good friends and would cover most if not all of my living expenses for personal residence. I would prefer to  put around 5ish percent down so that I would have more cash to work with when life happens after paying down payment closing costs and all the fees associated with buying a house. I plan to have around 30k by summer if not more if i continue at the rate i have been going saving every month. Just looking for some advice or wisdom from other bp members and if this is a good idea and how I should go about doing it or if there i anything I am missing.

[Scott S.]

Fantastic idea! Living with friends can be a blast when you're all out on your own for the first time and enjoy hanging together! Having said that, let me add some things to think about.

It has been said to not rent to family or friends if you want to keep a good relationship with them. Good friends won't take advantage of you, but realize that they may lose a job or rack up too much debt and find it hard to make their payments. These are standard excuses renters give when they're late in paying, right? Just have your response figured out beforehand and make sure they agree (since these kinds of arrangements are usually just handshake deals). If you need to carry them a month or three, would you be able/want to?

It's up to you, but I'd recommend that you keep the details of the finances to yourself, or at least downplay them. If they figure out that you're only paying $1000/mo but collectively they're giving you $2000/mo, how does that play out?

If you've got extra each month, then great! Sock that away to buy the next place that much quicker.

Btw, the areas you listed are my old stomping grounds. You might find some older/nice places in Valley Park area (Cedar & 165th).

I'm sure it will work out for you - good luck on finding the right place!