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Updated over 4 years ago, 05/01/2020
House Hacking Research #2- Ask/Answer any House Hacking Question!
Hello everyone,
This is part 2 of my research project for house hacking. Please let me know any questions you have surrounding house hacking. If you have the answer to any question you see, feel free to answer.
Thank you!
- Craig Curelop
- [email protected]
- Podcast Guest on Show #350
Originally posted by @Joan-Marie Pagan:
@Mike Roy By "cash flowing asset" u mean the SFH or Condo or something else?
Any asset that produces income that exceeds its expenses.
@Minh Nguyen House-Hacking is a great opportunity for living for free and potentially cash flowing on top of it. There are programs out there for 3%, 3.5%, or 5% down payments if you can't afford the 20-25% DP.
As you many not be as leveraged as you want to be, you can look at the other end of the spectrum; your cash-on-cash return. Little cash down and actually having reserves in your bank for any miscellaneous mishaps or repairs isn't always a negative thing.
Keep in mind, when you go to sell a multi-family, you're most liking going to sell it back to an investor. Where as the condo, you might be able to sell for a higher price and potentially sell faster.
Another thing to take in consideration, multi-families have the opportunity of bringing in revenue if one or multiple units are vacant, where as if a single family or condo is vacant you produce no revenue until a tenant is in place and under contract.
Best of Luck!
@Laura Hines Thank you for your response!
It helps a lot!
Hi all,
My first post here on BiggerPockets, thought I would get some advice on a potential property me and the fiance are looking to invest in and what to look out for? Appreciate any thoughts! Some quick facts:
- We live in Manhattan and looking to buy our first property (Currently pay about 2.5k a month rent, but it's time to leave and make the next jump)
- Looking at a property in Union City NJ (About 650k)
- Monthly payment all in (Mortgage/Taxes,etc.) look to be around 4.2k (5% Down, HomePossible Loan)
- 3 Family property in great condition (2 x 3bed1ba Units will be rented around $1700, while we plan to live in the basement unit).
That leaves around $800 a month, but adding in utilities, vacancy, maintenance rates, etc. That can probably go as high as $1500 a month which is still far less than we pay today. I know there are probably better house hacking deals if we looked further out in Newark, Rutherford etc. but the other half needs to be closer to the city with her work.
1 big downside, there is currently an oil tank that provides the heat/hot water to the entire building, I'm trying to see if the seller is willing to remove prior to closing (I'm aware of the environmental disaster issue).
1) Assuming we need to stay this close to the city, does this look like a good first time deal? My thinking is, after 1 year we could move out and look to get another property in a similar location
2) Oil tank issue? Any other smart ways of trying to handle the situation?
Appreciate advice/thoughts.
Thanks!
Ravi
@Aathavan Raviraj If they dont agree to remove the tank you can ask them to escrow a certain amount in case there is a leak which will cost more than the price for a standard removal. You can also have soil samples taken before removal to ensure that there is no leak and many companies will give you a firm price for removal and remediation after thats done. the last thing you want is an expensive environmental issue so make sure you know the status of the tank before you close. Also make sure you get an NFA (no further action) letter from the state if they do remove it and remediation is necessary.
@Allan Szlafrok Thanks Allan. The seller is willing to remove the tank so we put an offer in. Let's see, fingers crossed!
@Craig Curelop I am house-hacking a Triplex in Salt Lake City, UT. We have refinanced to a Conventional and are now looking for another property in the North-East SLC area. We were planning on using the rents from the current Tri and the standard 75% of rents from the units (not including the one we'd occupy) of the new Multi. The problem is with the new 2019 guideline change, we now cannot use the rents we'll gain from the property we're currently in. That cuts our buying power down by about $2200/mo. which is quite a bit.
Question: What alternative loan options do we have that have a similar, 3.5% down loan product we can use on Tri and Fourplexes? Any any help is appreciated.
Hello All,
I was wondering if anyone could hope to make profits on rent if the rate of interest is 9.5% and the rents are below 5%. I am from India. How to work around this issue, could anyone help?
Hi all,
How are units defined when assessing a multifamily? I'm trying to acquire a multifamily property with two duplexes (4 units) and a house (1 unit). Would this be considered commercial? Is there any way to have this categorized as residential if I will be living in the house or one of the duplexes?
In general, I am finding quite a few opportunities for small commercial (5 units), but not many with 2-4 units. Is this because commercial properties are more difficult to finance so more remain available, or is this just an illusory correlation based on limited experience?
@Aathavan Raviraj if i read correctly, the oil tank is currently in use. if the seller removes the oil tank, what will be your heating source? Who will be responsible for the purchase, permits and installation of the new unit(s)?
Thanks @Ray Reed ,I talked this through with my broker and he suggested 2 options,
A) We offer over asking and ask the seller to install this prior to closing
B) We offer under asking and install this ourselves after the fact
My preference is for A as it rolls the costs into the Mortgage and hassle is with the seller. Let me know if you've seen this scenario play out different ways?
@David Healey Hey how's it going?! Love what you & your family are up to! Way to be a great example as an agent! I want to make sure I understand your dilemma & sorry if it's obvious!
To check context: You want to purchase a Multi-family property and were planning on qualifying using 75% of the total Rental Income from the Triplex. However, the lender won't let you use the "future income" from the 3rd unit of the Triplex (that you're currently occupying).
- If I understand the situation correctly, could you "move in with family " for example or get a signed 12-month rental agreement on your current unit that would make it possible to count the income from all 3 units?
- Also, I've never been in this situation, but if you're leaving a Triplex & purchasing a Duplex (for example) that you'll occupy half of, can you count 75% of the Rental Income from all 4 of the 5 units that will be paying rent OR can you only count the income on the previous property (Triplex only)?
I hope my random questions make sense & I apologize if I've missed the point! :P Long day! Feel free to message me or reach out with details & I can ask around! I'm curious on how to navigate this situation & hope to have this problem in the future! :)
Where there's a will there's a way! You'll figure it out!! Best of luck!
-Danielle Hildebrand
Thanks for reaching out. Love that you’re a great contributor on BP and an SLC Agent yourself. My wife and I LOVE BP. It’s been a game changer for us that has helped us get into position to break the mold and help us achieve our goals.
Great Questions. Long story longer: Yes, we can use 75% of the remaining units (not including the one we will be occupying) "established rents" in the new Duplex, Triplex or Fourplex. And Yes, we are unable to use the rents from the unit we currently live in, to qualify for the purchase of the next property on an FHA loan because the FHA guidelines just changed. They used to say that we could use rents in the unit we are leaving if we lived 100 miles away from the next Multi we were to buy OR we had 25% equity in the current Multi. Now that OR changed to an AND. We have 25% equity, but we don't live 100 miles from the new one we want to buy.
So, we lost $2200/mo. worth of buying power from that guideline change and it’s harder now to be able to qualify for another Multi-Family.
All that to give some context for my question. It's harder to qualify for a Multi in a safe neighborhood, for a reasonable price with how strong the Sellers Market is these days. Question: What FHA alternative loan options are out there, specifically in our Greater Salt Lake area?
Any advise/help on this would be awesome. Also, we should put together a BP chapter or Think Tank bounce ideas off each other.
Why is it 2200/month that you are losing? Would you be renting the unit you are leaving for that much? Your situation wouldn't apply to me for a while, because I'm just getting started in real estate, but my husband and I are also planning on house hacking a small multifamily property, and I'm trying to learn more about FHA loans since that is what we would likely be using.
I've never posted on a forum before. Man, this took a lot of courage.
@McKenna Garcia Congrats on your first post. If you can find the courage to ask a lot of questions, BiggerPockets will be your very best resource for valuable content at no cost to you.
Fannie Mae is who insures FHA loans in case the borrower defaults on the loan, meaning the Federal Housing Administration (FHA) will cover the loss of the loan lessening the risk for the lender. As the old idiom goes, "He who pays the piper calls the tune." I.e. The FHA backs the loan and pays on the loss if the borrower defaults, so the FHA gets to make the rules (Guidelines). These are what your lender will have to use to make sure each borrower falls within in order to "Qualify" them for the loan.
The FHA changed existing guidelines in January of 2019. The old guideline under, "Rental Income on Retained Primary Residence," it changed from saying: "Rental income may be counted when relocating outside or reasonable commute distance for job OR borrower has 25% equity" but changed to: "Rental income may be counted when relocating and new residence is located at least 100 miles from previous residence AND If no history of rental income since the last tax filing, borrower must have 25% equity."
So, the $2,200/mo. we'd be getting in rents for the unit we are leaving would not be considered in the equation as rents received when qualifying for the new property. We will still get the rents and they will be cash-flow, but it cuts our buying power down fairly substantially.
We (and you) will still have many ways to boost your buying ability by maintaining a good debt to income (DTI) ratio and structuring your taxes each year to pay more to the Federal Government and the State, but you'll be able to show you earn more and can therefore qualify for more.
Hope this answers your questions. Happy posting and good luck in your future REI's.
Thank you! That answers my question perfectly. Thanks for explaining it to me. Good luck on finding your next property, and me finding my first one.
Please check my thinking process on hacking my home and let me know if my numbers seem right. Previously I've been looking for rental property and almost closed on a single family unit, but the seller wouldn't negotiate. Anyway, where I am now is looking at hacking my current house into a rental and just getting a fixer to live in for a couple of years.
Current house-3 Bd/2 Ba , single garage, fenced yard, great location
Current house value - 150,000
Owed-99,000
Payment w/ taxes, insurance- 950/month
Potential rent accord. to PM- 1400/month
Cash Flow-350/month after fees or manage myself for full amount
So the cash flow should be better actually than almost everything I've looked at so far.
Houses I'm considering as a fixer. Something 160,000-190,000 that could potentially be sold for 200,000-220,000, so could flip and profit 15,000-30,000.....or could repeat process and potentially rent for 1800/month.
Hi all
I am brand new in real estate investment, I already read my first book :)
I need some clarification on house hacking:
I have been told that once you are own your primary residence you can't buy a 2nd property with the intention of making that a primary residence, UNLESS you are selling you actual home.
Does anyone have any experience in this? Is that true?
Also when you are buying your first property with owner-occupancy, you must actually move in there, correct? So basically you can't house-hack, only if you physically move in.
Thanks,
Originally posted by @Edward Krause:
@Craig Curelop any tips for how to FIND duplexes etc? Orlando, FL here and would love to start researching/pricing out a duplex/triplex house hack to save myself money (rent is outrageous $1200+utlities for my 1 bedroom thats actually really nice). I try to look on zillow, loopnet, realtor.com, and it seems there are very few and far between options that I could find... when you go into a house hack with multiple units, do lenders typically see the income potential for the other half and allow you to borrow more than youd be approved for on any traditional house? Very new and just learning, but hope to get started asap.###@
To answer you question about lenders including income potential from other half.. Yes, I have done 1 duplex deal that I house hacked and the lender did include income from other unit. However, they only used 70% of it. So if the other unit was $1,000/mo. they would include $700 as income for calculating DTI. I believe the 70% is standard, but can't say for sure.
@Craig Curelop
Preface: this would be my first step into real estate inverting.
I’m looking to start a house hack with a four-plex or similar property. How can I get the downpayment? I know that I can save my money up for a year or so to get the downpayment and I am fine with that option, but I was wondering if there are other options that could potentially result in getting the downpayment a little quicker. I can get approved for the 400k loan, but getting the ~13k for the downpayment would just take some time to save up to. Any suggestions? If saving up is the only/best option, that’s fine, I just want to make sure I know of all the possible options.
Hello
Moving to Montana in early/middle of 2021 I want to sell my house now and buy a duplex or four Plex this would be my first investment. Need some direction thanks 
Originally posted by @Joseph D Chapman:
Hello
Moving to Montana in early/middle of 2021 I want to sell my house now and buy a duplex or four Plex this would be my first investment. Need some direction thanks 
I have lived all over Montana, the state can vary significantly depending on where you go. What areas are you interested in? I would be more than happy to give you advice along your journey. Feel free to PM me anytime!
@Craig Curelop
Greetings! I'm doing some long term planning for purchasing my second small multi family which I plan to house hack. I'm currently on a FHA loan and I don't think I can use it again. I believe for my 2nd home I can put down 5% and get a conventional loan. Should I refinance my current loan to qualify for a FHA loan to use 3.5 % down for my second home? Or should I just put down the 5% conventional? Also, when is the best time to refinance?
@Joe Sadusky hi. So take out equity after a year and then go BRRRR another property ?
We are looking to buy a 2/1 for my husband to live in at his job out of state. He would intend to AirBNB the other room.
We currently OWN our house...with no intention to move soon. How would we even go about financing such a venture? Is it a regular mortgage?
Thank you!
Avery