Funding Brainstorming for House Hack

[Josh Schaap]

Hello all - fairly new to the REI (and BP) community, but I've invested a lot of time listening to podcasts, reading books, starting to network locally etc. I'm looking for some creative options for financing a potential next purchase. I'll try to briefly describe my current situation:

I'm looking at turning my primary residence into a rental and buying a duplex, triplex, or quad and house hacking. Started talking to some lenders and things aren't looking too well. Not a whole lot of multifamily units on the market locally right now, but a decent duplex would most likely be in the 350k to 450k range. If I have to put 25% down, that's going to cost me ~100k that I don't have. I work a W2 job that pays slightly higher than the median income for my area. I work a gig type of job on the side trying to build up for a down payment.

Primary residence is a townhouse that currently has a ~83% LTV and I will most likely break even with rent or have to pay less than $50/mo out of my pocket to cover expenses. Property is in a desirable area with lots of opportunity for appreciation (value has increased by 35% since I purchased in 2018).

What are some creative options I can look into for financing a next purchase? Or if you would advise against buying a 2nd property right now, what other ideas would you recommend?

Thank you all in advance for your responses!

[Lawrence Potts]

Quote from @Josh Schaap:

Hello all - fairly new to the REI (and BP) community, but I've invested a lot of time listening to podcasts, reading books, starting to network locally etc. I'm looking for some creative options for financing a potential next purchase. I'll try to briefly describe my current situation:

I'm looking at turning my primary residence into a rental and buying a duplex, triplex, or quad and house hacking. Started talking to some lenders and things aren't looking too well. Not a whole lot of multifamily units on the market locally right now, but a decent duplex would most likely be in the 350k to 450k range. If I have to put 25% down, that's going to cost me ~100k that I don't have. I work a W2 job that pays slightly higher than the median income for my area. I work a gig type of job on the side trying to build up for a down payment.

Primary residence is a townhouse that currently has a ~83% LTV and I will most likely break even with rent or have to pay less than $50/mo out of my pocket to cover expenses. Property is in a desirable area with lots of opportunity for appreciation (value has increased by 35% since I purchased in 2018).

What are some creative options I can look into for financing a next purchase? Or if you would advise against buying a 2nd property right now, what other ideas would you recommend?

Thank you all in advance for your responses!

If you’re planning on owner-occupying said multifamily, you can only use FHA 3.5% down or go significantly higher down payment with a conventional product. If it’s a three or four unit, the property needs to pass an FHA self-sufficiency test as well. All things to consider when financing a multifamily using FHA. My guess is you’ll have to have a signed lease for your current primary to show that you have rental income to offset your mortgage payment. Then you’ll need to show 3.5% down + reserves and funds for closing, inspection, appraisal, etc. Not including money you’ll need for repairs before leasing out if needed. Sure, you can go creative, but maybe look a bit deeper into what tools you have at your disposal right now. I highly encourage you talk to a few more lenders, especially lenders that own real estate. Kind of surprised this lender missed that one.