Office hacking - have you done it? Thoughts?

[Marty True]

There have been quite a bit of posts on here about "house hacking" so I am curious to hear from those who have tried "office hacking"...

Much of the financing for commercial investments has restrictions on owner occupancy however, in an office building or complex where there is plenty of square footage to essentially "office hack", I would think that opportunity would be present - where you would occupy less than 50% of the space. 

On the other side of those restrictions, there are other loan programs that require a majority share of owner occupancy, which could also work in an office hack deal. The SBA 504 loan program allows for real estate purchases but not for "investment in rental real estate" so I'm curious if that program could be used in an office hacking situation and if anyone has in fact, used the 504 for this purpose.

I look forward to hearing from those whom have done something like this...

[Brian Schmelzlen]

This is the type of deal that I am looking for.

I don't think a 504 loan will work for this because of the 50%+ occupancy rule (subleasing doesn't work; they thought of that).  I think you would need a 5 year loan with as long of an amortization period as you can get.

I think for office hacking to work, you have to take a BRRR approach. I think you need to find a building in a decent area that for whatever reason has a low occupancy rate (50-60%) and at least 6-8 units. You would want to be able to easily identify what is causing the low occupancy (poor management, significant deferred maintenance, etc.) so that you can quickly fix it. Moving in yourself (paying full market rent to yourself), getting the building fully occupied, and ideally being able to increase rents over time with the improvements you make to the building will greatly increase the building's value. At that point, I would refinance to pull out all the cash you invested.