House hacking via an FHA loan and AirBnB for a multi-family

[Patrick McNerney]

Hello fellow bigger pockets users,

I am a new bigger pockets podcast listener and forum member and this is my first post!  I recently discovered the bigger pockets podcast and it has blown my mind and changed how I think about real estate and home ownership.

I live in San Diego, CA and as many of you know it is a very high cost of living area.  House prices are extremely high with prices for desirable area's going $600k+.

I recently had an idea that would help me afford property in this city.  So here we go.

My plan was to purchase a four-plex multi-family with an FHA loan where my girlfriend and myself would live in one of the units and we would AirBnB the remaining three apartments to cover the cost of the mortgage. I was planning on using the FHA max loan amount of $1.326M and buy a four-plex in a desirable beach area where AirBnB's go for a premium and have high occupancy rates. According to airdna.com the areas I have been looking at average $120+ a night and are occupied approx 75% of the time. This would more than cover our monthly PITI payment. This would allow us to no longer spend any money on rent and our AirBnB tenants would fully cover the costs of home ownership.

So my question is, how feasible is my plan?  My girlfriend and myself both make good money ($185k combined) from our careers, but without the income of our AirBnB tenants we would not be able to afford a $1.3M mortgage payment.  Would a lender even consider approving us for a loan knowing that much of our monthly payment would come from AirBnB rental income?

Thanks in advance for any advice and critiques.

[Dan H.]

I see replies but not from people familiar with the San Diego market. We have San Diego STRs and LTRs. Our STRs (a duplex) are beach and go for over $250/night average (We average over $15K rent/month for the duplex).

Here are some hurdles/risks:
-Finding a 4 plex at the price you indicate is unlikely. That is about the value of our little beach duplex.
- As others indicated getting financing will be an issue.
- There is a big risk with San Diego STRs. San Diego a while back passed anti STR regulations but a petition gathering was performed to put it on the ballot. The regulation was pulled when the issue qualified for a vote. So you may think all is fine. However, there are multiple anti-STR regulations being proposed at the state level. Until this stabilizes, STRs are high risk. As a house hack your risk is less than non-owner occupied STR investors because some of the proposed regulations exclude owner occupied.

IMO it is too high risk to purchase in CA (anywhere in the state) relying on STR rents. The RE must pencil out as profitable as a LTR (No San Diego beach RE at this time would be financially smart as an LTR because they are priced as though they are an STR) and if it can be used as an STR it is bonus.

Good luck