Can I BRRRR and House Hack?

Question

Is it possible to do BRRRR and house hacking on a single property?

I have heard that they are different real estate strategies, but some people say it is possible to implement both strategies on a single property.

If you did use both strategies on one real estate investment, how did you use both strategies on that investment?

Jaron Walling · Answer

@Evan Cruz The first property I bought was a BRRRR/house-hack combination. I choose that path because it was the fastest way to build equity and to cut my living expenses. It's possible especially if you already know someone that wants to live with you. My brother rented a room for 2 years. Remodel took 5-6 months. Found deals and paid cash for everything. I also planned to hold this property for long time. Ended up moving and renting as a LTR> cash-flow play.

For BRRRR type deals you want to work in reverse. You have to know the market and ARV. Without it you can't find/buy/create a deal. My first property was distressed, cosmetic+ rehab but it qualified for an FHA loan, 5% down. I looked a 7 properties all within 5 mile radius. Look in the "fridge area" C class zones. Contrary to what I read online my lender never questioned the condition of the property. People say FHA loans are more strict but that wasn't my experience. I believe it was because I had good track record with the the local lender, $25k cash in savings, and a property that appeared okay in photos.

If you can find the right property, sacrifice for 6 months, it can absolutely change your life. My cost of living has be reduced on every deal since my first property. The American Dream is alive and well in this country but you have to make it.

Kevin Sobilo · Answer

ARV on a house hack that you are buying with a conventional conforming loan really isn't very important! I know that sounds crazy, but here is why:

1. You aren't selling the property for many years! So, the market will change a LOT before you sell the property.

2. Even if the cost of the rehab doesn't increase the value of the property much it might be worth while BECAUSE you are doing the rehab to maximize RENTAL income NOT ARV because its a rental and you aren't doing a BRRRR.

3. While estimating ARV is not as critical when just doing a house hack you plan to hold, it is always good to know. You obviously don't want to put grossly more money into a property than its worth. So, having some idea of the ARV is always useful.

4. Also, estimating the property value periodically over time allows you to make decisions about when the right time to sell or refinance etc might be. So, while it may not be the most important thing when you are rehabbing to rent, it is always a factor in decision making.

5. Also, keep in mind the ARV is just an estimate. There is no guarantee it will be super accurate.

Wale Lawal · Answer

@Evan Cruz

Yes, you can combine the BRRRR and house hacking strategies on a single property, but it requires careful execution. The key is to buy a distressed multi-unit or single-family home with space to rent out, rehab it to increase value, refinance to pull out equity, and then continue living in one unit while renting out the others. This approach allows you to reduce living costs while recycling capital for future investments.

Good luck!

Evan Cruz · Answer

@Kevin SobiloWould you suggest finding the ARV or current value of the house hack for purposes of finding the selling price of the house hack in the future if I decide to sell it or is there another way to find this selling price?

Shiloh Lundahl · Answer

@Evan Cruz Yes, you can use both strategies. It is not difficult. First decide which type of house hacking you want to do. If you are single then it is even easier. Get on a bunch of wholesaler lists. Find a house that comes up on the wholesale list that has a lot of bedrooms and buy it as an investment property with a hard money loan. Then fix it up and force equity and then refinance it and move in a bunch of people to do a rent by the room model. Or, second option if you are not single, you could find a house on the wholesale list that can be divided into two units or a house that has a guest house and then fix it up and rent out one of the units and stay in the other. Simple. Let me know if you have more questions or would like the steps described in more detail.

Andrew Syrios · Answer

Sure, the two strategies are compatible. Basically it would just be getting a really good deal on a house hack and then refinancing when you're ready to move out and buying the next house hack

Kevin Sobilo · Answer

FHA loans use the appraiser to inspect property condition. So, the loans are "supposed to be" more strict about condition. However, depending on the appraiser what your experience is can vary widely.

It will have nothing to do with the local lender because they don't get to choose the appraiser or influence that at all. Keep in mind your lender doesn't care too much because they are almost always only originating the loan. They aren't planning to keep the loan even if they remain the servicer you make payments to.

I don't know if this can be proven or not, but if the appraisal business is slow, an appraiser might choose to be more strict when checking out houses during FHA appraisals because for the deal to close all the issues cited need to be fixed and they pay the appraiser to go back and reinspect. So, the appraiser stands to collect a re-inspection fee!

However, when appraisers are busy, they may not want those re-inspection fees as they probably make more money just doing more appraisals instead. I don't know if that can be proven, but it gets mentioned time to time and the narrative seems to track.

Evan Cruz · Answer

Interesting reply, Kevin. To your 3rd point, for a house hack, would you recommend finding a property that has some damage and needs an update to get it to its After Repair Value (ARV) or don’t worry about updating house hacks at all nor the concept of finding ARV for house hacks and just look for properties that are move in ready and can cash flow from day one? Thanks for your reply.

Kevin Sobilo · Answer

@Evan Cruz, certainly its possible, BUT not common. Here are a few thoughts:

1. Typically a BRRRR requires a severely distressed property and a significant rehab to make the numbers work. So, that usually means the investor is working with their own cash or a hard money loan.

2. A house hack is usually done by an investor who doesn't have the experience to get a hard money loan and doesn't have the cash to do a deal without financing. They instead use conventional conforming loans with low down payments meant for primary residences to purchase properties ready to live in!

3. While a house hack purchased with a conventional conforming loan might be dated or benefit from a cosmetic rehab. That is almost certainly not enough of an upgrade to make it work as a BRRRR.

4. An investor who has enough cash to invest and rehab a house usually doesn't wish to refinance and live in it with roommates or neighbors in the same building. Usually an investor in that kind of financial position wants to have the home they want not live in their investment.

So, while it is certainly possible to do both on a single property, I don't think its very common.

Can I BRRRR and House Hack?

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