Partnership house hacking???

Question

Hey Everyone!

I was thinking the other day how much I really wish I would have house hacked before my wife and I built our house. Now that our house is complete we don't want to leave it anytime soon... We had one of my sisters move in with us to help with the bills so that is sort of hacking I'd say. Then I just recently had this idea...Maybe its not possible but I have not heard of anyone doing it before.

What if I created a partnership with my younger sister (she is 20) and she signed an FHA loan for a property - duplex/trip/quad that I find. I would give her funds for the 3.5% down and closing and she would live there. But when I buy the property it will be in my name. Essentially she would house hack for me and I would be the owner. I could worry about the management and she could live for free or just a couple hundred a month... Then I have a property for 3.5% down. What are your thoughts?

This could possibly not work legally or for any other reason but if its possible I am going for it!

Thanks for the feedback!

Christine C. · Answer

Sounds like what you are looking for is to be a "non-occupying co-borrower for your sister" on an FHA, which allows you to help her buy/occupy the primary residence, gift her the down payment AND maintain ownership stakes in the property.

2018 FHA Loan Requirements 500-579 FICO score requirement with a 10% down payment 580+ FICO score requirement for borrowers with at least a 3.5% downpayment An appraisal must be done by an FHA approved appraiser. Mortgage insurance (MIP) is required Steady employment and be able to prove income with recent tax returns, W2’s, and paycheck stubs Two years of employment at the same company. Non-occupying co-borrowers allowed At least 18 years of age Must occupy the home as primary residence View more information in the HUD Handbook HUD 4155.1 here.

Co-Borrowers Must be:

listed on the title

Have ownership interest

Obligated to pay the monthly payments

Sign all loan documents

Jacob Carlson · Answer

Joshua thanks for your reply! I would have to agree with you. That is also a concern of mine. I will have to consider some exit strategies for that scenario. I think that I will figure something out when the time comes... For now, it will be a matter of me finding the right property for a decent price and making sure everything actually works the way I intend it to which, at the end of the day, means me getting the cash flow return from my sister buying a house... Which seems kind of strange!

I think there are opportunities here I just need to explore into them and figure out how to do it.

Any one else have an opinion??

Joshua Hively · Answer

Hey Jacob. Thanks for posting. I am following this because I have been considering to a structure a house hack partnership. However in my case I am looking for more of a 50/50 type deal for help with down payment. I am curious to hear peoples thoughts on your idea. I think it is a solid plan. The only thing that comes to mind for me, that you should research would be the "due on sale clause" when the property is transferred to your LLC.

Jacob Carlson · Answer

So, I asked an attorney what they thought about this and they basically said that it should work. I could gift the downpayment (which requires some paperwork) and have my sister be the one on the loan. This means its her name on the property. I want that property in my LLC so I think after the 1 year residency (for my sister) is up I could essentially buy it from her. Not sure if she could sell it for like $1.00 to me but that is something I will have to figure out down the road...

I would essentially be connected to the property by being the property manager and collecting rent as well as doing the tasks of any property manager using my LLC - This would save me from opening another LLC for the partnership and more tax complications. I am going to be in contact with a local mortgage loan officer and see what my next steps are.