Live-in Flip vs. 2-4 Unit House Hacking

[Greg Zunich]

I have been looking to buy my first house and want to find a 2-4 unit to house hack with. Everything I have found thus far will cash flow when I rent it out when I move out and will be about break even, some loss, if I self manage while I live there.

It has been difficult to find a property and it got me thinking about any other potential options out there. 

My question to everyone is what is a better way to live for near-free; House hack by buying a 2-4 unit and living in one of the units or find a property to live-in flip?

I have very quickly run some numbers and it seems that you can make money with a live-in flip if done correctly but I see much more risk from a beginner rehabber's perspective. Can anyone speak from experience with either method?

[Dave Van Horn]

@Greg Zunich

Well, I have experience house hacking and although I haven't done a live-in flip, I have done countless flips and a live-in rehab. From what you describe, in my mind, only one of the two scenarios really makes sense.

With the flip you'd have to pay to live there out of pocket (since you're paying the mortgage - you can't get a hard money loan for a house you live in) all in hopes to make a profit/reimburse your living expenses when you finally do make the flip. As a first time rehabber, there's definitely more risk with this option especially in terms of when you'd complete the flip but also if there are any major repairs that spring up and/or if you were run out of repair capital. Not to mention, speaking from experience there can definitely can be aggravation of living in a house that needs repairs.

I personally think the House hack makes a lot more sense. Less money out of pocket (especially at the outset), less aggravation with repairs, plus when you leave you'd now have a steady income streaming asset (that could even raise in value) until you choose to sell. You'd have the ability to eventually refinance. So really, it gives you more flexibility and more options that's not possible with the live-in flip. I should also add that while you live there, you're putting in time towards paying down your mortgage on the buy and hold, which is always a good thing. 

If you're really ambitious, you could use hard or private money for a rehab to flip while you're living in your house hack. That way you're doing both, living for near free and using OPM (other people's money) to turn a profit - all with less risk.

Hope this answer helps.

Best,

Dave