Huge return of House Hacking??

[Judah Hoover]

History is replete with stories of heros setting out to search for nearly unattainable objects that will grant the finder with great reward. Jason and his Argonauts sought the golden fleece, King Arthur and his Knights of the Round Table with their quest for the Holy Grail, Ahab had his white whale, even Fox Mulder and his search for the elusive “Truth” that was allegedly “out there”.

For the past few years real estate investors have searched, largely in vain, for affordable 2 to 4 unit buildings to do what is called “house hacking”. The object is to find a small multi-unit building, live in one unit and rent the others out. It is touted by many as the ideal entry point to real estate investing and therefore step one in building a portfolio of rental properties.

The challenge has been too many searchers and too little available inventory. So even though many blogs, gurus, and coaches teach people to set out on this crusade, precious few attain their goal. In the hot real estate market we have been experiencing 2 to 4 unit buildings have been gobbled up by seasoned investors. This has pushed up the values to the point where they don’t make sense for house hackers, or rendered the available options in undesirable locations for owner occupants.

All this is about to change. The troubles in the economy are going to spark investors needing to liquidate some of their current holdings to raise capital so they can weather the storm. Some of the properties they will be selling will make ideal candidates for house hacking.

More opportunities are out there or will be soon than have been in recent memory. Your aim should be to prepare and be ready for them. As I say to my four children whenever we are in parking lot, “Keep your eyes up and your head on a swivel.”

What makes house hacking so attractive to owner occupant buyers is the ease of and number of options for favorable financing. Because owner occupied mortgages have a much lower rate of default banks have lower down payment requirements, sometimes as little as 3.5% to 5%, and the interest rates offered are the lowest there are. Maybe not quite as low as an owner occupant buying a single-family home, but pretty close. When you move to more than 4 units, the lending laws change. Lenders treat properties over 4 units as “commercial” no matter if the owner lives on site or not. This eliminates many of these potential benefits.

With great mortgage options, and a very likely increase in inventories now is the time for the return of the house hacker! If you have looked to take advantage of this strategy in the past only to give up, this could very well be your chance to jump in the lucrative world of investment real estate. Call your lender and get pre-approved. Ask a trusted realtor knowledgeable in the rental market to start looking on the MLS for you. Contact local wholesalers and turnkey providers in your area and tell them you are in the market for house hacking deals. Who knows how long this window of opportunity will be open, don't miss it.