House Hacking Partnerships

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House Hacking Partnerships

Troy Williams
Rental Property Investor · Florida & Shanghai · Member since 2017 · 192 posts · 68 votes

Hello, I'm currently living overseas and am thinking of moving back to the states by the end of the year. I already co-own 6 units with conventional loans using 20%-25% down, but would like to try something a little more creative to sponsor my next investement. 

Considering two options:

1. House Hack on a two to four unit residential building, assuming it allows a low deposit FHA loan (3.5%) with a co-investor. My investment would be 30% of the downpayment, a committment to live in the complex for one to two years, plus I would manage all initial rehab work. Co-investor pays for rehab costs. I would receive 8% property management fee to take care of all issues while living there. Partner and I share equity 50/50.

2. House Hack on a much larger multifamily, 10-30 units with co-investor. My investment would be 10% of the downpayment, a committment to live in the complex for two years, plus I would manage all initial rehab work. Co-investor pays for rehab costs. I would receive 6% property management fee to take care of all issues while living there. Partner and I share equity 50/50.

Note: i have experience with construction, architectural drawings and city reviews.  I am flexible to live in either Texas, Florida or Colorado.

My questions about this idea...

1. If I were to find a partner to invest and use a conventional bank loan, would the bank and FHA allow both of us to be on the title, even if I was the only one living there?

2. Would the bank allow our combined income to determine debt/income ratio?

3. Does anyone reading this have experience with similar situation or have feedback on how to make this deal better?

Thx, 

Troy

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Curt Smith
Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
8y

FHA was designed for occupants not groups of investors. No one's opinion is worth a penny. Call a bank's loan officer. They all do FHA.

FHA is so generous now, 3.5% down. Some states have first owner programs to cover more of the down.

Say a Quad is running $400k, $100k/door, then 3.5% is $14k.  Plus closing etc etc.   That's not much cash to get into an excellent investment situation where certainly 3 paying doors will certainly cover the mortgage plus some.

Call a loan officer, or better yet a broker, one who fronts for many lenders.

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  • Curt Smith
    Rental Property Investor · Clarkston, GA · Member since 2012 · 2k+ posts · 1k+ votes
    8y

    FHA was designed for occupants not groups of investors. No one's opinion is worth a penny. Call a bank's loan officer. They all do FHA.

    FHA is so generous now, 3.5% down. Some states have first owner programs to cover more of the down.

    Say a Quad is running $400k, $100k/door, then 3.5% is $14k.  Plus closing etc etc.   That's not much cash to get into an excellent investment situation where certainly 3 paying doors will certainly cover the mortgage plus some.

    Call a loan officer, or better yet a broker, one who fronts for many lenders.

    1Reply
  • Troy Williams
    OP
    Rental Property Investor · Florida & Shanghai · Member since 2017 · 192 posts · 68 votes
    8y

    Thanks @Curt Smith  Yes, the numbers are easy to manage, but I fear I may have maxed out my debt to income ratio with my last 2 properties and not sure how the banks will look at the income generated by current and prospective properties combined.   Agreed, need more discussions with the loan officers, brokers, etc.... just wondering if I could be more creative with a partner that might want to co-invest with only 3.5% down.   

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  • John T Lizzo
    Investor · Chicago · Member since 2018 · 14 posts · 17 votes
    7y

    Hey @Troy Williams, this is very late, but I'm interested in doing a house hack with a good friend of mine who is a current roommate. I was wondering if you ended up doing a partnership and how that worked out?

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  • Troy Williams
    OP
    Rental Property Investor · Florida & Shanghai · Member since 2017 · 192 posts · 68 votes
    7y

    hi @John .  I managed to work out a partnership for a duplex in New Orleans on my next deal (closed last Dec) but it wasnt a house hack this time around.  So far going great.

    0Reply
  • Julie Coleman
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 22 posts · 16 votes
    7y

    Hi @Troy Williams Interesting to stumble upon your past post. I am currently setting up my financials to house hack a four unit residential building with a co-investor. What was your feedback from co-investors and banks? Why did you end up not pursuing the deal? Lesson learned pros and cons of the deal set up.

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  • John T Lizzo
    Investor · Chicago · Member since 2018 · 14 posts · 17 votes
    7y

    @Troy Williams Great to hear!

    0Reply
  • Troy Williams
    OP
    Rental Property Investor · Florida & Shanghai · Member since 2017 · 192 posts · 68 votes
    7y

    @Julie Coleman still living on the other side of the planet, so i did not pursue the house hack deal because I cant live it in it, but did still end of buying the place with a partner who allowed us to pay cash so no bank…that was nice!        Lesson learned (regardless of whether it is a house hack)… make sure you have a good realtor.   They make a huge difference. We struggled with ours compared to purchases in other states.   

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  • Leah Stuever
    Realtor · Dallas, TX · Member since 2019 · 194 posts · 164 votes
    7y

    @Troy Williams

    May I ask how your deal was structured? Percentages invested and net income split?

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  • Troy Williams
    OP
    Rental Property Investor · Florida & Shanghai · Member since 2017 · 192 posts · 68 votes
    7y

    Hi @Leah Stuever sorry for the late reply.   That was a 50/50 rev-share deal.  For actual investment, I paid 12.5% in cash down, the remaining 37.5% of my 50% share I borrowed from the partner who also bought the other 50% share.   

    So in essence, the partner paid 87.5% cash up front, I paid the other 12.5% ...we bought the place in cash and I have a personal loan to pay back my partner for my 37.5%.   We share the profits 50/50, plus my partner gets interest on the amount loan to me.  Worked out beautifully.

    1Reply
  • Tyler Garcia
    Investor · Tampa, FL · Member since 2020 · 20 posts · 4 votes
    4y

    A few years late, but man I'm loving these creative financing structures. I literally thought of doing this and did the research on it and see there's others doing the exact same type of structures, gives me so much confidence! Also, when you mentioned you split 50/50, are you referring to monthly cashflow as well or ONLY equity?

    0Reply
  • Tyler Garcia
    Investor · Tampa, FL · Member since 2020 · 20 posts · 4 votes
    4y
    Quote from @Troy Williams:

    Hi @Leah Stuever sorry for the late reply.   That was a 50/50 rev-share deal.  For actual investment, I paid 12.5% in cash down, the remaining 37.5% of my 50% share I borrowed from the partner who also bought the other 50% share.   

    So in essence, the partner paid 87.5% cash up front, I paid the other 12.5% ...we bought the place in cash and I have a personal loan to pay back my partner for my 37.5%.   We share the profits 50/50, plus my partner gets interest on the amount loan to me.  Worked out beautifully.

    Awesome @Troy Williams -- A few years late, but man I'm loving these creative financing structures. I thought of doing this and did the research on it and see there's others doing the exact same type of structures, gives me so much confidence! Troy, when you mentioned you split 50/50, are you referring to monthly cashflow as well or ONLY equity?

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