Most Important Rule To Know For House-Hackers

[Austin Negron]

I'm a strong believer that a house-hack is one of the first steps to wealth and financial freedom.

However, this one rule is overlooked and constantly kills deals before they even happen:

The self-sufficiency test.

I talked about how we can leverage an FHA loan to put 3.5% down on a home.

And a small multifamily property is the ideal situation. This would mean properties that have 2-4 units.

However, there is this quirky rule that applies only to 3&4 unit properties - it must pass the self-sufficiency test.

In order to do this, you'll need to prove that 75% of the rental income you’re likely to receive will exceed the full monthly mortgage payment.

For example, if the monthly mortgage payment is $3,000, this means the property must produce at least $4000/mo in rent ($4,000 x 75% = $3,000).

In short, it basically means that the income brought in from rent will cover the mortgage.

However, in a market like Boston, this isn't a common situation because property values are high & the cash brought in from rent rarely meets this requirement.

This means that the most realistic outcome is to purchase a 2-family property for one's first house-hack because SS doesn't apply which allows for more flexibility for getting your first property.

Hope this helps!

#househack

[Lien Vuong]

Good points made here! You can also apply for Masshousing conventional loan which would not be subjected to the Self Sufficiency Test (SST) as mentioned.