Los Angeles House Hack w/ 100% OPM

[Disia Page]

This is what I want to do. I want to apply the BRRRR strategy to a house hack. A lot multifamily properties in Los Angeles exceed the FHA loan maximum criteria (no surprise). Right now, I do not have enough cash for 20% down required by a conventional loan. So, what I want to do is obtain a hard money loan to put in a cash offer on a duplex that is 700K. Rehab the property then rent it out 1 of the units and live in the other. Then refinance (with a porfolio lender) to pay back the hard money loan. And, of course, repeat. Is this doable?

[Justin R.]

@Disia Page Is it doable?  Theoretically, sure.  But, the numbers are daunting.  Likelihood of success w/o some sort of insider advantage is about as high as the Rams winning the Superbowl tomorrow.

Let's say you found the $700k duplex and could get it under contract. Say you also find a HML who will loan you above 80% LTC. And, say you're able to hire a GC to do some work on it to the tune of, say, $60k. Say you get that property to appraise for ~$1M in order to get your money out, and pay those HML points and fees. Let's say you can find a bank willing to loan you 75%LTV on it and you can close that loan.

Once all those dominos fall, you'll have PITI of, say, $5200/m. Let's say you get $3k in rent for half of the duplex. That leaves you with rent of $2200/m, plus covering vacancy, maintenance, capex, and all the rest of the costs landlords know all too well. Does that sound attractive? Not to me.

Every one of those eight "says" is actually really hard and involves a lot of work or a lot of luck, so the chances of stringing them all together are... well... what's the SuperLotto jackpot at today?  :) 

Keep in mind that if such an opportunity existed and is obvious, your offer would be one of 50 on it because every first time or experienced flipper in LA would be salivating to do it.