1st Time Home Buyer / Rental Investment in Seattle, WA Advice

[Kelvin Yuchen]

Hi everyone! I am a 24 years old living back at home in my parents basement saving up money. Right now i have an available $60-70k cash to put down on an investment property. My parents would help cover another 10% so i don't get a PMI. However, i also know i can apply and only put down 3.5% per FHFA. I plan on moving out within a year to somewhere in Seattle where prices are around $600-700K for a single family / townhome while working in the Seattle area. My plan is to rent out spare bedrooms from the townhome/ single family creating a total of 2K of cash flow minimum so i would need to cover the remaining 1K per month. Given my situation, is it worth it for me to get into the Seattle market? Would you advise buying a home that is in need or repair / fix up or go for a townhome as a beginner home?

What advise would you give me on the tax side or things if i did go with a townhome? What would i be eligible in write offs?

[Michael Haas]

With the amount of capital you have saved up you could definitely do a house hack here in Seattle, and definitely won't have to pay more than $1,000 for the remainder of the mortgage. They can be hard to find, but most of our Seattle house hacks have paid us to live there, and the ones that haven't had all cost less than $1,000 for the remainder of the mortgage. We buy detached single family homes, but you can definitely go with a town-home if that's what you'd prefer- you'd want to focus on large square footage, high bedroom count, and consider avoiding luxury features that add cost like rooftop decks unless they're important to you.

Typically house hacks operate similar to a home office deduction - take your eligible, deductible expenses and multiply them by the portion of the house that is a rental (for example, if you buy a 4 bedroom town-home and live in one bedroom you could deduct approximately 75% of eligible expenses). I'm not an accountant so you should definitely talk to your's, but this is the advice we've received from our accountant. 

My two cents on PMI: its not that bad if your credit is good, and there are a lot of benefits to minimizing your cash investment in a deal. Cash-on-Cash return/ROI will almost always be significantly higher on a 5% down payment than a 20% down payment, even with PMI.

PM me if you'd like to grab coffee and talk house hacking! We've been buying a property to house hack just about every year since 2013 and have a solid portfolio of rentals now, happy to share what has worked for us. Cheers!