How much was you first property for a live in house hack?

Question

I live in Texas and i want to get into real estate investing by house hacking, how much was you first property you house hacked? how did you fund it? was it by a FHA loan 3% down, or 20% down.

I'm having a hard time deciding how to come about my strategy, I can either go 1) Use a FSH 3% down and get approved for a 200k to 250k and be in a house within a year, however with this strategy  i can see my self possibly breaking even or still paying 100 to 200 into the mortgage which is not bad because technically that is my "rent" per se. Or i can go 2) save up 20% which will take me forever and possibly 3 to 4 years but with this method i'm guaranteed to cash flow profit .

with strategy one, it will help me use my salary to save up rigorously for my second property, with strategy two i can use profit and salary to save up faster for second property. i'm looking into refinancing the fha into conventional after a year to repeat the process.

What was your strategy to get into investing while house hacking? but what price did you choose and why?

Joshua Parr · Answer

Mine was a single family that I rented a room out to a friend so it wasn't a multi family house hack but it worked out well. Bought the house for ~60k and put about ~30k into it. Sold for ~160k 2 years later. My payments were like 500/month and I rented the room for 400/month so most of my costs were covered. I put 5% down on purchase and did a conventional loan.

What I would recommend is finding a 2, 3, or 4 unit to house hack. I would do your first option. There's no use in waiting if you can get financing and get tenants to pay down the mortgage and possibly receive some cash flow. You just have to be sure numbers work and that you'll be fine getting through bad events (vacancies, bad tenants, etc.)

If you can, find a multi-unit that a landlord is willing to owner finance to you. That makes the financing end of it easier and you can put property in an LLC or trust for some protection.

Best of luck!

Bart H. · Answer

What we did with our house hack (duplex where we lived on one side) was to model it as though we were buying a SFH.  We picked a price that was in line with what we could afford if we were just buying a house on its own.  That way if we hated being landlords, we could just stop renting the other unit, and we didn't absolutely have to keep the other unit rented if the tenant paid.Look for a property that is a decent deal.  It doesn't have to be a fantastically great deal.  Remember you are buying a house to live in.  The property should continue to appreciate and rents should continue to go up as you live there.

Also consider houses that are in the path of progress.  and if the down payment is a big problem, consider a deal with 5% down.

Best of luck, thats how we began, I think you are headed the right direction!!!

Kenneth McKeown · Answer

@Roberto Lugo you should talk to @Jorge Gonzalez ! He's doing #1.

With that being said I believe that getting into a property and building equity, tax incentives, debt pay down, etc for the next year years will far exceed sitting around for 3-4 years saving up and then purchasing something. There's a multitude of ways to start investing but I myself would lean more towards option #1. Joshua did mention finding a MFH but they are very difficult to obtain & you would be fighting tremendously and potentially even overpaying in our market (maybe).

Now regarding owner finance... that's something I would do MYSElf as an owner, but I wouldn't purchase something owner finance. That's my own opinion there though and I could ramble on about why. But ultimately I'd say jump in sooner rather than later and make sure the purchase is a good one.

Jorge Gonzalez · Answer

@Kenneth McKeown

@Roberto Lugo

Hi Roberto, you’re in the perfect market to get yourself  into a house hack property. I myself moved to Dallas dfw metro from Los Angeles just to be able to begin my real estate investing. It seems like we have a similar background, strategy and goals. I myself work doing financial statement audits for real estate private equity funds and construction companies. I’m currently leveraging my career to fund my house hack sfh investments with 3% down conventional and 20% down investment loans. I also work full time in uber to expedite the process to increase my capital (increase revenue your streams!) and am finding myself being able to fund 2 single family homes a year. One being 3% house hack at price ranges about $175k-$210k specifically with 4 bathroom- 2 bath in very good rental markets, you have to do your research, and if purchased correctly, you can make cash flow upfront. I would say getting yourself into a home ASAP as Kenneth mentioned outweighs the benefits of waiting. All at the same time while I’m in my house hack, I then save 20% for a similar home, this can be 3 bedroom 2 bath similar price range. And because of the one year clause for conventional, you have to live in the property for at least one year, I plan to convert that into a rental, and then move into my next house hack the following year, rinse and repeat , and you should be on your way to financial freedom where you can quit your job, but it takes time and dedication.

Feel free to reach out to myself or Kenneth if you have any other questions, he was such a big help in this process.

Let’s connect sometime.

Roberto Lugo · Answer

@Jorge Gonzalez Hi Jorge, id like to connect sometime soon whenever you are available, we do have much in common, hope to hear from you.

Steven Foster Wilson · Answer

@Roberto Lugo my first house hack was a duplex near OSU campus. The purchase price was $305,000. We used an FHA loan with 3.5% down ($10,675 down) @ 4.5%. This was saved money. We rented out the other side and had the intention of renting out the extra rooms in our unit. One side was 4 bed 1 bath, the other side was 2 bed 1 bath. We could have got about $400 a bedroom for the extra 5 bedrooms. However this was going to only put us at about positive $100 cash flow.

Instead we decided to risk it all for a higher return. We spent 1 year and about $50,000 (some money came from Grandma, some went on 0%apr credit cards) to transform our duplex into a 5 bedroom 2 bath, and a 3 bedroom 1 bath, getting more then $500 per bedroom.

We were able to refinance and cash out. We cashed out $70,000 (covering our debt) and got a lower rate of 4.125%.

We still live in the property, renting out the extra 7 rooms cash flowing us $900/month. We have also signed leases for next year that will cash flow $1,596

After saying all this, I love the FHA because it makes housing affordable, the only downside is the monthly payment is higher, and PMI, so you have to get creative!

Roberto Lugo · Answer

@Kenneth McKeown Thank you got your input it was informative, I’ll reach out to Jorge!

Roberto Lugo · Answer

@Joshua Parr Thanks you for your insight! I appreciate it.

How much was you first property for a live in house hack?

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