Real Estate Investor · New Brunswick, NJ · Member since 2017 · 63 posts · 4 votes
I'm currently in a two family house and thanks to BP have realized that moving into a bigger unit mix will help me house hack and actually make money in the process as opposed to just getting a discounted mortgage.
So my question is has anyone hacked into a commercial sized property (meaning 5+)? Ive found a few three and four family places, but I keep asking myself if maybe owner occupying something like a 6/7/8 plex would be even better?
Obviously there is more work with the bigger property but there is also a lot more reward. I'm just more concerned about potential tax issues with an owner occupied commercial property.
Has anyone had any experience with this?
Des Moines, IA · Member since 2016 · 41 posts · 8 votes
9y
House Hacking seems to be done to lock in favorable owner occupied financing. Either low money down or better interest rates. It also provides an "easy" way to get the 1-2 years of landlording experience that banks often require for full-fledged investment property.
I would run the numbers but if you have the 25% down for a larger commercial building and are already living in a discounted mortgage situation it might be better to stay in the duplex and manage an 8 unit you don't live in.
Des Moines, IA · Member since 2016 · 41 posts · 8 votes
9y
House Hacking seems to be done to lock in favorable owner occupied financing. Either low money down or better interest rates. It also provides an "easy" way to get the 1-2 years of landlording experience that banks often require for full-fledged investment property.
I would run the numbers but if you have the 25% down for a larger commercial building and are already living in a discounted mortgage situation it might be better to stay in the duplex and manage an 8 unit you don't live in.
As Jared mentioned, once you're borrowing on a 5+ unit property, you're into commercial financing and you get no benefit from living in it. In Indy our property taxes on commercial property are 2% of value and 1% of value if you're living in it. Check the rules in your area.
Commercial loans are much worse than residential loans. Standard terms on smaller deals are 5 year fixed rate, and a 20 year amortization. Residential loans are fixed and at a 30 year am.
I like your thinking though. I moved to larger multi family for exactly the same reason you're considering it. Just make sure to take into account the loan terms on larger properties.
Thanks for the input Louise, you're definitely hitting on one of the concerns I had.
So I guess I should clarify a bit BC maybe my vernacular isn't correct. I was under the impression that "House Hacking" was more or less just living in a multi family (or I guess single family with roommates) where the owner either lives for free or actually makes money while owning a house as opposed to the more traditional home-ownership that consists of one family living in one house and killing themselves to pay their mortgage.
I didn't realize that part of that term also meant not having any or little downpayment or simply getting a good rate.
But the idea of rates does tie into what I am curious about BC if I were to say, move into an 8-plex, I would be making money living, and I would also presume that my living there would help the bank approve financing a little easier since I will be on-premises.
But, the issue I'm not sure about is essentially the difference bt residential and commercial loans. I know commercial are shorter with higher rates and the occasional massive balloon payment. So does the benefit of making let's just say an extra 30k a year living outweigh the less attractive commercial rates?