House Hacking a Duplex for beginners

[Justin Schrout]

Hello all!

I just finished reading the Bigger Pockets "The Book on Rental Property Investing". I thought it was a great intro to the topic, and now I'm looking to get way more in depth into analyzing deals for finding a potential rental property. I've signed up for a few webinars and I'm super interested in learning more!

A quick little background about myself - I recently accepted a new job in Northern Virginia, so I'm looking to house hack my way into my first rental property. I start around mid-October. One interesting thing I have discovered is that it is pretty hard to find a multi family unit in Northern Virginia! 

The first piece of advice I'm looking for: Would it be advisable to attempt to switch jobs while at the same time buying a house? Should I sign a lease and save up for a year?

For the second piece of advice, I have found a potential deal, but I'm not sure how to appraise the deal itself. Since there are really no multi family residences in Northern Virginia, I had a hard time finding comps. 

Here is a link to the deal here. I found the annual property taxes run about $1900/yr. 
The deal is a 3BD 2BA duplex. I assumed this to mean the entire property is being sold and each side has 3BD 2BA. I factored in rent for a 3BD apartment would be about $2300/mo  in the given location. I used the calculator on this website and found a monthly cash flow for vacancy/cap ex./management/repairs/etc. to be about -$700/mo. 

Would someone be able to tell me if an asking price of $400k is acceptable? Too high? Too low? Also, I'm interested in learning more, so any more recommendations for books on house hacking would be greatly appreciated!

Thank you!

[Graham Nadler]

Hey Justin,

It is exciting and scary when considering your first deal!  I am a mortgage lender in Ohio and thought I would give some background on how this would be viewed from a lender's perspective.  

The first step would be to get pre-approved with a lender in your area.  This will help you gain an understanding as to what you can afford and what your estimated total monthly payment would be to help you run your investment analysis.  If you get pre-approved and then switch jobs you need to consult with your local lender before doing this to make sure you are still okay.  Job changes are a big deal to lenders and can potentially be negative so before making a job move I would strongly encourage talking to a lender first. You will likely only be able to get pre-approved while employed.  There are some nuisances if you have an offer letter in hand but @Heather Skowronsky is right you will likely need 2 years of federal tax returns to demonstrate two year work history.  

It sounds like talking with a lender would be a good first step for you.  A good lender should also serve as a consultant as to the do's and don'ts to getting qualified to purchase.  After speaking with a lender you can go start looking at properties with a good Realtor.  After speaking with a lender I would encourage you to reach out to a good agent, someone with experience in investment properties that can help you run numbers and help you analyze deals as well as show you properties.  Try giving Heather a call she seems like she knows what's up! Good luck to you!