First Time Home Buyer/House Hacking

[Mariah Destruel]

Hi everyone!

I am looking to buy my first house and start this path into real estate investing! The house I found is located in a family neighborhood and is walking distance from schools and outdoor parks. It seems to be a safe investment in that I feel confident that vacancy won't be an issue and I don't feel rent will be affected much by market changes. Since it's my first house, I'm wanting to do a conventional loan with 3% down. The house definitely needs some upgrades on the interior and some cosmetic fixes too. After a year of living there, I will move out and rent out the full property. I plan on house hacking by renting out 1 or 2 of the other rooms while I'm there.

Anyway, my question is regarding the BRRRR method. Should I upgrade the property from the get-go, refinance it, and take out money to invest in another property? Can you do that if you have to live there for a year? Should I wait until I'm ready to move out to upgrade the property? I'm new to the industry, so my questions may seem naive, but definitely in need of some guidance.

Thank you!

[Tyler Gibson]

@Mariah Destruel Welcome to the game! So first thing if you are looking to put down 3% then it sounds like you would be using a FHA loan as opposed to conventional loan with usually requires 20%. I would suggest waiting to do the upgrades and refinance unless you have all the cash to do it from the jump before people move in. you are going to have a seasoning period of 6 months to a year before a bank will refinance the loan anyways. Instead of spending save every penny you make from the rooms you rent and use that cash to buy the next one. Then you could look into refinancing. The trick to BRRRR method is buying something that is below market value due to it's condition and fixing it up. If this is a house hack that you are going to be living in then likely it will already be in a decent condition and will not be a prime candidate for BRRRR. Additionally FHA loans have stricter requirements as to the condition of a property and the value they will loan up to. So look at this first investment as an opportunity to lower you living expenses and increase savings rate to put yourself in a position to get the next one.

Not all investors will agree with me but I prioritize my living situation and overall financial stability of growth I hedge risk with the fact that is if doesn't work I won't be going bankrupt or be foreclosed on. Don't over extend yourself too early in your investing career. All too often I see properties that are for sale because someone bought it and started pouring money into it to fix it up only to find themselves no longer able to pay for the mortgage or taxes and end up losing it.