House Hacking

[Jermaine Gourdine]

Hello BP,

I'm a new member and a beginner in real estate investing. I'm interested in house hacking a 4 unit property? The downside to this seems to be the fact that I will not be able to close on the property under an LLC which leaves me liable for potential mishaps. How can I protect myself and assets without closing under an LLC?

[Logan Allec]

@Jermaine Gourdine, one thing to keep in mind when looking for an FHA owner-occupied triplex or fourplex is that 85% (75% in some states) of the market rents on all units need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance). This is known as the self-sufficiency rule. It only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing. I put together a spreadsheet to help potential house hackers quickly analyze whether or not a property qualifies.

There are other FHA requirements concerning which you should contact your local lender, but determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search, especially in expensive markets.

Good luck!