House Hacking SFR Minneapolis / St. Paul

[Jesse Collins]

Hello All,

I was curious peoples thoughts on House Hacking a SFR. I have a few buddies from college that will be living / renting from me after I purchase a home within the next couple of months.

My goal is to House Hack for a couple of years and then turn the whole house into a rental property. During the House Hacking period I will be having my roomates pay the mortgage while I save up enough money for a down payment on another property then keep snowballing off of that. 

Thoughts? Any insight helps! 

[Evan Kraljic]

My personal opinion is that in our market I would rather househack with a 2-4 unit if you can make the numbers work. Renting by the room for a single family home is a pretty awesome way to get some extra money and live with buddies, but as a long term investment strategy I'm not a fan. 

To me, it sounds like more turnover, more potential for drama since when you move out the people living there may not know each other, and more work. Everyone's goals are different, but one thing I like about real estate investing is that if you manage your systems correctly, you can frontload the work for a relatively easy payout later on. 

In the Twin Cities I think you could still make more money buying a duplex and renting by the room than a single family. Also, if/when you get sick of renting by the room you could rent out the units individually for maybe 30-50% more than if you rent out the whole single family residence. 

Look at the price per bedroom for listings and compare SF to MF and it will bear that out many times, at least it did when I was trying to find my first purchase and wasn't sure what to buy. On top of that, you're competing with a hell of a lot more people when it comes to buying SFHs, so even if you see a 5 bedroom place go up for <300 K it will likely get snapped up real fast. 

These are just my opinions, and like most others I am probably biased based on what has worked for me. I think the idea of living in a SFR and renting to all my buddies sounds sweet, but I think trying to manage that once I've moved out and onto my next househack would be a pain in the ***.

Are you planning on continuing to rent by the room once you move out or convert to one rental unit?