House Hacking a BRRRR in Dallas

[Elliot Tan]

Hi Texas BP community! I'm looking to move to Dallas with my wife and 2 kids in the near future, and we want to house hack a BRRRR (or is it BRRRR a house hack?). Our hope is to build wealth and start our buy and hold portfolio by doing this 3 to 4 times (or however many times my family can take it!). Starting with a duplex and going from there! As we prepare to do this financially and mentally, we wanted to reach out to see if anyone has had any experience doing this in the Dallas market, and wouldn't mind sharing their experience.

Some questions we have are: Is this even possible? Haven't seen too much of it on BP. I'm having a hard time finding out what the mechanics of doing a house hack and BRRRR together are like.

Would also love to hear some of the realities that come with doing this with a family.  Any recommendations, difficulties, surprising joys you had from the experience would be great!

Lastly, if any of you don't mind, would appreciate getting at least a ball park idea of what the numbers would be.  I know each situation and property will have very different numbers.  But if you could share the numbers you worked with for you specific deal (purchase price, rents, refinance rates and if there are any difficulties refinancing while living in the property, etc....) I think that would be very helpful to know what's possible, and be able to start planning around those possibilities.  

Thanks for taking the time to read this post!  

[Bruce Lynn]

Well when I think of house hack, for the most part I think of someone buying let's say a 4 bedroom home and living in one bedroom and renting out the other 3 and ideally that income from renting, pays for all of the mortgage or at least a good chunk of it.   As long as your income supports it, you could potentially also do that with a 2-3-4plex, but the rub seems to come in for most people who want to do this is their income.  Most lenders will require initially your income to cover the entire mortgage payment and not allow rental income to count.  A lot of what you hear on the podcasts are pretty old now in a new economy.  Won't say it is impossible, but very tough to find everything to fit into place.  It sounds great, but for most people it is not realistic or doesn't fit their lifestyle, or what they envision does not exist in every market.

Since you have kids I think it makes it even tougher.   In DFW we don't really have a lot of duplexes-3-4 plexes perhaps like other parts of the country, so that is challenge #1.  Challenge #2 is finding one that is either vacant, or has one side vacant, or on month-2-month, so you can move in one side.  Often these sell occupied with tenants in them to investors.   Challenge #3 is finding one in a location you like with schools you like and where the numbers work....these are just like unicorns....when you look at the numbers these days I'll see places for sale that are $400,000 with something like $2800/month rent total...so $1400/side....even if you rehab, what bump up in rent will you expect...$150/month---$200/month...so then you're stuck...maybe you do that over 5-6 years..upgrade/bump upgrade/bump, but tough to do this every year....do one, pull all the money out, find another one in a great place for your kids, move immediately from one to another, do it again, Repeat Repeat.

Everyone mentions FHA, but there are often other better loan options out there. Run from people who are pushing you to FHA....it might be an option, but it might be the most costly for you.

Now that is not to discourage you.  I think if you are focused and very very focused, you can do it....they trouble for most is that life gets in the way.  You get busy with school and life and soccer practice.

I think your first step is to decide where you want to live....pick a city.  Then get a list of 2-3-4plex for sale.  Go scout the neighborhoods and the schools and see if that is where you want to live.  Then work thru the numbers. Get prequalified for a loan....and then see where you stand with the purchase price....Take the purchase price you can afford and work backwards... what are the rents, what will the rehab be, can you live in one of the units while rehabbing the others, you do those first to get the rents up, what will a rehabbed unit rent for vs where you purchased it, how long are the leases and do the finances work when you don't renew the lease so you can rehab the unit...can you do it in a month or two..and therefore no rent for that unit and rehab costs, after you release 2 of the units, are you willing now to move to one and rehab the one you're in....and if not, are you rehabbing the one you're in while living there?   Many 4-plex are 2bed 1bath or maybe 2bed-2bath, so is that what you're willing to live in for this year or the next 5 years with your family.   If you don't want to do this with a 4plex, then you can repeat the exercise with a duplex and see if that works for you.

Well and if all that doesn't work...see if you can find a fixer/beater home in a place that becoming popular, live in it, rehab it, and refinance out of it and Repeat.

and #1 rule is make sure your wife understand that dust means money and make sure she is on board with the plan.  She will be moving and living in dust and plenty of work for the next 3-4-5-10 years.