Can you house hack a duplex?

Question

Hello BP Community,

So I'll get straight to the point. My wife and I are planning on selling our current home so we can dramatically lower our mortgage with another house that is half the cost of our current mortgage. We plan on moving in to a single family home and want to bank the difference to invest in to our first property. While living in that house we want to renovate it and apply the BRRR strategy.

We are also considering a plan B where we sell our current home and move in to a duplex. We are looking to fix up the duplex while we live there and rent out the other side. Once we get the whole house renovated we plan on renting out both sides and repeat the process on another property.

My question is this, can one typically house hack a duplex as you would a single family home? I know it may ultimately depend on the laws in that state and the loan you are approved for but I'm curious and would love to hear from anyone who has or knows somebody who has tried this strategy. What was your or their experience from it?

Thank you,

Richard Sherman · Answer

@Franklin Curry Jr DUDE...you are halfway to my FAVORITE stategy....forget the duplex, get a 4- plex!  4 unit buildings are the largest you can get with a traditional mortgage (yes, exactly like the one you get for a single family house.) You will get a credit for a portion of the rents of the others units as well.  Live there, get it fixed up a bit, then go find another 4 plex and do the same thing..so on and so on...that is how we started, first 8 units were two 4 plexes...this year we are BUYING and additional 58 units total..haha, how times change but still have the original 8!!

Ryan Daniher · Answer

I bought a duplex as a primary residence, lived in one unit, fixed it up and rented the other while I worked. Now I moved to another house using an FHA loan and it's a triplex. The duplex is now a rental and I got a HELOC on it before I moved out. You CAN do it.

In my experience, on a conventional Fannie/Freddie loan you can go as low as 5% down on a duplex or single family primary residence purchase. But, if you buy a triplex or quadplex with a Fannie/Freddie loan even as a primary residence you need to make a 25% down payment. That's why I got a triplex with an FHA loan. In my experience what I learned is that an FHA loan on a triplex (or quadplex) must meet a self-sufficiency test.  75% of the rental income from the two rental units you're not living in must be greater than your PITI (Principal, Interest, Taxes, and Insurance). Keep this in mind when going to a mortgage broker or any banks that sell their loans on the secondary market. Happy house hacking!!!

Joel O'Leary · Answer

The answer is yes! You can house-hack a duplex, triplex or fourplex just the same as you would a single family home.

Check out @Chad Carson's blog where he goes through step by step his first house-hacking (with before and after photos) of a Fourplex.

https://www.coachcarson.com/house-hacking-guide/#3   Merry Christmas!

Franklin Curry Jr · Answer

@Eric Giovannucci that's what I was thinking. I want to start and running the numbers and our next phase in life this seems like the best step. Like Dave Ramsey said, "Live like nobody else so you can live and give like nobody else."

Chace Fraser · Answer

I like the idea of combining your plan A & B. It would read like this (I'm assuming your first "property" is a flip):

"We plan to sell our current home, move into a property we can house hack to drastically drive down our cost of housing (my hope is we find a 4 unit), use advantageous financing where we can put as little as 5 percent down (or as much as we'd need to to make our cost of house $0.00 per month after allocating money for vacancies, repairs, reserves, capex, etc), and we'd bank the difference from the sale of our house to invest in to our first property. While house hacking we'd still pay ourselves the "rent" we're used to paying so that we are saving up to purchase our second house hack in a year or two. After our second house hack we would then start saving up for a single family home to live in. At this point, we'd have enough passive income from our 8 units that one of us could (insert dream here)! We would also continue to buy investment properties and would be seeking more value-add opportunities since we've had experience fixing up the properties we've lived in. We hope to have somewhere around XX units in X years"

... that's how I'd write the story

Franklin Curry Jr · Answer

Thanks @Ryan Daniher. I'm still trying to wrap my head around the HELOC strategy and how I could use that down the line.

Franklin Curry Jr · Answer

@Chace Fraser THIS IS EXACTLY WHAT I AM LOOKING FOR! THANKS. I like this story. I will be sharing this with my wife. I never thought about having several properties that would pay for or future single that we could call home. Great idea!

Franklin Curry Jr · Answer

@Michael N. thank you! This was my thought exactly.

Franklin Curry Jr · Answer

@Joel O'Leary Wow thanks! I love real world applications I can see. This helps a lot!

Chace Fraser · Answer

Hey @Ryan Daniher thanks for letting us in on the self-sufficiency test!

Can you house hack a duplex?

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