House Hacking Research #2- Ask/Answer any House Hacking Question!

[Craig Curelop]

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!

[Taylor Chiu]

Originally posted by @Joel McKinney:

Hi Craig!

Found a duplex with an in-law suite in Virginia for $300k.  Looking to rent out both sides of the duplex and live in the in-law suite by myself (I'm in the military and live apart from my family for the next year).  Property description says duplex rents for $2,685 combined, so it sounds like it could cash flow.  Just trying to figure out how to finance it with little/no money down.

I think I'm having an "AHA!" moment of creative financing, but figured it'd be a good idea to get a reality check.  Could a lease option sandwich be a viable solution?  Could I lease option, get tenants in place and then get a bank loan to pay the option?

@Joel McKinney - Could you qualify for a VA loan? That would get you in for 0% down. Or FHA, which would get you in at 3% down.

[Taylor Chiu]

Originally posted by @Shane Short:

Hey everyone, my question is regarding long term house-hacking and moving away from it. I see a lot of people commenting on here that they are treating house hacking differently since instead of trying to profit it, their goal is just to have to pay a minimal amount of the mortgage, like 10% or so. This is great for a few years, but what happens long term? I see others commenting not to worry as much about the 1% rule in these situations. 

The way I look at it, no one is going to want to live in a house hacking environment for 30 years until their mortgage is up. So shouldn't you be treating a house hack exactly the same as a potential rental? Once you move out, you are going to want to be getting some cash flow off of it, or at least break even to gain some equity buildup/ HELOC advantages to use as leverage for another cash flowing property correct?

 @Shane - I've never really seen anyone who wanted to house hack a specific property long term. Unless you mean someone like @Ben Leybovich, who rents out his casita to allow him to live in more of a luxury house hack. For most house hacks, it doesn't make much sense to me to stick around any longer than 2 years, which is the min. time you need to live there to get the capital gains exemption.

[Taylor Chiu]

Originally posted by @Tereal Wilsonn:

Greetings 

Thank you for making this post, ill try my best to communicate thoroughly.

Ill start off with explaining my situation, in 2015 November i closed on a 2%er Duplex  for 85k in Metro Detroit .At the time of sale i acquired a tenant paying 775, they moved on in Oct  2017 i Lost 3500 with a contractor that ran out on me while updating the unit, then i got another contractor to come  in and finish for 8k lesson learned since then Ive gotten better tenants and raised the rents to 925 monthly.My debt service at the time  mortgage, taxes and insurance totaled 697 

June 2018 i close on a 4plex and i move my mother in my side of the duplex and i move out while she lives rent free . were working on her credit so she we can find her a duplex of her own.

In August of 2018 my lender for the duplex sold my loan which caused my debt service to change from 697 monthly to 878 monthly.

My insurer tells me my insurance increased because of cost to rebuild so they had to raise them.

• Since Ive moved out should i look for an landlord Insurance Policy?

My new Mortgage Company tells me my property taxes have increased, but i called the city and they said they were lowered

• How do i contest my property taxes with my lender to prove they are overcharging me monthly?

• Should i place my propety in an LLC?

• lastly will i lose out on tax write offs for repais since i dont have my property in an LLC?

 You should be able to just call your lender to ask for them to reevaluate your property tax escrow. I bet you can email them proof showing the lower tax amount. 

You can place your property in an LLC, but if there's a loan on it, I imagine it's still in your name. So they might flag you for changing ownership of the property. Depends on the lender though.

No, you shouldn't lose out on tax writeoffs. With my LLC I just have it roll over to my personal taxes anyways, so there's no difference on the tax side as far as I'm aware (I'm not a tax professional though)

[Taylor Chiu]

Originally posted by @Alex Shapiro:

Hi There!

What are the best ways to finance the down payment, closing costs, and rehab costs? In other words, say I just find a nice triplex with a vacant unit and BRRRR wont work because other tenants are under rent control and paying below market value rent (and so fixing it up and increasing rent wont allow me to refinance effectively). Yet, the property can still cash flow and there's always a chance a tenant moves and I can reset my basis, which makes it still an interesting investment. Further say that the owner is willing to do a 70% seller carry-back loan at 4% for 30 years. This leaves the down payment of 30%, the closing costs, and rehab costs (or I can just go traditional and get a 3.5% FHA and forego the carry-back). Interested to hear everyone's thoughts!

 If you need to come up with 30%, some options are:

• private money loan from friends/family
• cash advance off of some 0% intro apr credit cards (risky, but can be done if you are careful)
• possibly a hard money lender, although this seems like the type of thing where you'd have to have an existing relationship with them to get them to do it

[Chad Mitchell]

Hi, I'm looking to invest in my first multifamily. It's an older home that's split into 5 apartments. Would I still be able to secure residential financing (HFA, 203k, or standard mortgage) with 5 units as opposed to 4 or less?

Also, any advice on where to start looking for financing? I'm leaning towards a 203k, so that I can I include the rehab expenses. Currently, one unit is rented, but the other 4 units are vacant (owner didn't renew leases for those 4 with intent to sell). My goal is to rehab the other four units prior to renting them out, so I can increase rent and do a potential refinance in a year or two.

[Sean LeBlanc]

@Chad Mitchell unfortunately residential loan products like FHA are only available on 1-4 unit properties.

If you are looking at 5+ units, you will need a commercial loan which typically requires a down payment of around 25%. 

Let me know if I can help. 

Thanks!

[Chad Mitchell]

@Sean LeBlanc - Thank you for confirming! And, will do.

[Tanner Flint]

I am looking into difference financing strategies. I have come across a VA Loan. I myself am not a veteran, but my grandfather is a veteran. Would I be able to cosign with him for the potential 0% down like I could with the FHA loan? And from my understanding the VA loan does not have PMI with it so it would reduce the expenses and allow for a higher cash flow. Would this be possible?

[Byron Scott]

@Craig Curelop or anyone. I am preparing the rehab a duplex. I am using a fha 203k loan. Do you know anything about benefits of including some energy efficient stuff? or any other things I can add to my rehab that would improve value or create benefits? Thanks!

[Alex V.]

@Wesley Whitehead Google search for blog post on "The True Cost of Commuting." If your goal is to house hack and use frugality on your way to FIRE then I'd say go with the place close to work. After reading some MMM you will understand why. That is all with the qualifier of live where you will be happy and comfortable. If the transitioning neighborhoods are going to make you miserable then it may be wise to play the long game and be happy where you're at and spend a few extra $s.

[Alex V.]

@James Middleton house hacking your way to a $1,400 a month payment is still better than a $5k a month payment, no? I'm in the same boat. We dreamt of pulling off the living for free thing for a couple of years but it's nearly impossible to find a place in a good school district to do so.

[Wesley Whitehead]

@Alex V. Great observation! Many of my coworkers talk about the commute the will have to make in an effort to save money and I tell them “what about the time cost you are paying to commute to work”.

I will be traveling extensively for work for the next two years so I figured who pay for rent or a mortgage on a place that I use part time when I can gain equity on someone else’s dime and use my salary/ per diem on my continuing goal of FI (saving my money has never been a problem).

[Sean LeBlanc]

@Tanner Flint unfortunately your grandfather being a veteran will not give you access to the VA loan program. The only people allowed on the application for a VA loan is a veteran and there spouse, or another veteran.

[Joan-Marie Pagan]

@Mike Roy By "cash flowing asset" u mean the SFH or Condo or something else?

[Joan-Marie Pagan]

@Mike Roy By "cash flowing asset" u mean the SFH or Condo or something else?

[Joan-Marie Pagan]

@Mike Roy By "cash flowing asset" u mean the SFH or Condo or something else?

[Alexis Bulongo]

Hi Craig,

How do you analyze your side in the calculation? do you combine the expenses with the other side? or you just analyze the tenant side. and if you hire a manager, which side he/she will paid on?

[Tanner Flint]

@Sean LeBlanc thanks for that information. 

[John Wright]

Originally posted by @Lamar Jean:

After house hacking for a year, how do one get a second property to house hack?

 @Lamar Jean some lenders will now let you use your rent income towards your debit to incom ratio towards your next purchase.

[John Wright]

Originally posted by @Chad Mitchell:

Hi, I'm looking to invest in my first multifamily. It's an older home that's split into 5 apartments. Would I still be able to secure residential financing (HFA, 203k, or standard mortgage) with 5 units as opposed to 4 or less?

Also, any advice on where to start looking for financing? I'm leaning towards a 203k, so that I can I include the rehab expenses. Currently, one unit is rented, but the other 4 units are vacant (owner didn't renew leases for those 4 with intent to sell). My goal is to rehab the other four units prior to renting them out, so I can increase rent and do a potential refinance in a year or two.

If you have equity in your current property you could use a HELOC to fund the down payment of the new property and possibly even the renovation. Good Luck!

[John Wright]

Originally posted by @Jassen Bowman:

Originally posted by @James F.:

HI Craig & Others, 

I am currently owner occupying a triplex that I bought with an FHA 3.5% loan at the end of September 2018. I'm trying to move into another multi-family property and keep the triplex I'm living in now as a rental property. I have talked with a few bankers, and they said that I would not be able to get another FHA loan and that a conventional mortgage on a multi-family property would start at 15% down for a duplex and go up from there for every additional unit up to four. I was wondering if there is a way to move into the next property with a smaller down payment ideal under or around 5%.

Thank you! 

Are in a market that appreciates? Have you increased rents? If so I would start asking about a new valuation based on your current NOI.

[Shazia Chiu]

@Charlie Granados I'm not sure what options are available to you in Long Island, but for my first house hack we bought a duplex (lived in one side and rented out the other). For our second house hack we purchased a fourplex. I have a client who bought a single family home for his first house hack and rented out the additional rooms in the house. There are quite a few ways to pull it off depending on what you're looking for. :) 

EDIT: Just realized your comment was posted quite a few days back, haha. Hopefully you still see this and find it helpful! 

[Jack Zheng]

I have a rental home right now that is being used as collateral on a HELOC. It is currently generating 1700$ a month with PITI @ 1200$ a month.

I am living with my parents as that home is generating cash flow. I am thinking of buying a town home or a multiplex, but don't know if I would be able to take out a FHA loan on that property. If not is there another way of creative financing to get another property if I live in it?

If I am able to get a FHA loan, would I be able to move out in a year or two and rent out my unit even its still under the FHA loan and I am not living there anymore?

Just not trying to put up a bunch of cash for another investment home as the properties near me in the twin cities area are pretty expensive.

[Kim Handelman]

Hi Everyone, 

I am looking to buy a home to house hack in my small town on the shoreline in CT. I have to stay in my town for the kid's schools and it's slim pickings. I've found a property that would be perfect but it was an overpriced short sale for 2 years and the family signed it over to the bank and walked away. It's not on the market now but I know it's in the foreclosure process. Flippers circle like vultures in my town and I want to try to get it before it hits the market since they pay cash and will more attractive than me. 

My question is, how do I get an offer to the bank before they put it back on the market? I'm a real estate agent if that helps but don't know how the process works.

Thanks!

[Laura Hines]

@Jack Zheng if you do an FHA loan you should be able to move out after a "seasoning period" which is typically a year and still keep the structure of the loan. I would make sure to double check with any lender about what their seasoning period is if they have one. If you are upfront with your goals lenders will want to work with you. However, if you move out before the period where you are required to be there, it is loan fraud. So make sure you are communicating with your lender to know what is required of you. One thing to keep in mind with an FHA is you can only have one FHA loan.