Starting out. Overwhelmed.

[Account Closed]

Partner and I have been pre-approved for $350K. Combined gross annual income about $110K.

Looking to buy in Greeley, we are willing to live in the basement and rent out the upper part of the house to increase profitability.  

Realtor sent us two options at exactly the same price: $345K. BUT, here's the differences:

House 1: Built in 1978, 3 Bed, 4 Bath, 2 Garage Spaces, 3,100 Total SqFt, 0.22 Acres, (9,552 SqFt Lot).

House 2: Built in 2017, 5 Bed, 3 Bath, 3 Garage Spaces, 3,204 Total SqFt, 0.14 Acres, (6,000 SqFt Lot)

Both properties are in the same ZIP code, a 7-minute drive away.  It is obvious from the pictures that House 1 would require quite a bit of rehab to build equity and rent out at a good price.  I feel it is overpriced for its condition.  Unsure if our strategy should be focused on building equity on an older house, or buying a new one, when the asking price is the same.

[Dan Mackin]

It's not really the HOA rules I'm concerned about. It's more city and county regulations depending on where the properties are. Many single family home regulations do not allow secondary units. If you're renting the basement separately that is considered you doing a second unit. Plenty of people do this, but I wouldn't want my plan to be based off of something that I'm hiding from the city.

House hacking is very investor friendly. It's only something investors do. To do it you don't have to make money while you're living in the property. The whole point of the method is that at minimum you are utilizing the low down payment options that are available to owner occupants. You can easily buy a property, live in it for a year and save another down payment. Then after that year you rent it out to someone else and buy another house. Rinse and Repeat. If you can make money while you're still in the property that is just icing on the cake. 

If you only have 10k to put down and you're qualified for 350k, that makes me wonder what type of loan program you're using. FHA down payment is more than 10k, HomeReady is 10.5k, There are 1% loans that could work. Then you have closing costs of around 4k in many cases. Just be sure if your plan is to use it as a rental down the line that you're cautious of using CHFA loans. They don't allow the property to be rented unless you get a yearly voucher from them allowing you to do so. If you do purchase a property with CHFA plan for a refi which will cost you more money and restart your owner occupancy term in most cases.