What to do after youre first house hack?

Question

Hey all!

I'm looking to acquire my very first investment property where I live in Salt Lake City and I'm looking to find a property with a separate apartment of some sort or a duplex. I'd love some advice from anyone that started real estate investing with house hacking and how they moved on to other their 2nd, 3rd, and 4th+ properties. How did you finance those deals after you put money into your first property? Did you house hack BRRRR? Or did house hacking allow you to save enough to pay for the next deal quickly?  I'm planning on doing a low down/FHA for this first property, and Ive heard David talk about getting a new house hack every year. I'd just love some advice on more details of that strategy. Thanks a bunch!

Daniel Beckius · Answer

@Jackson Smith!

First property you can utilize Max Financing which would be 3%, 5% down conventional or 3.5% down FHA.

After a few years you can buy a 2nd property with either FHA (if you didn't use your FHA loan) or Conv 5% down.  Easy to underwrite when you got from a duplex to a single family.

Then you can buy second homes for 10%-15% down but it has to be somewhat of a distance away.

Also, if you have a girlfriend, fiance (not married) you can use them for max financing as well, separate to yours.

If you have a lease agreement on your past residences the lender will use 70% of the gross income from the lease you provide towards your income.

Jon Schwartz · Answer

Jackson,

I'm in the midst of this transition now!

While I'm still living in my duplex, I opening a HELOC to access all the equity I have in the building, after $500K.

I'm going to move out and into a rental, rent up the second unit, and then when I have no debt on my balance sheet and $500K in a line of credit, I'm going to buy the next property!

I'll tell you what, though: rather than focusing on steps 4, 5, and 6, focus on step 1 and take action! Get that first house hack under your wing before worrying too much about the second and third. Real estate is very rewarding over time.

Good luck!

Best,

Jon

Logan McKay Zylstra · Answer

My wife and I cannot be any bigger fans of house hacking! I first bought a duplex in Provo and then another in American Fork a year later. Our next one will be in SLC in a few months.

Negating your living expenses (and letting appreciation run in our market), allowed us to save for our down payments more quickly than if we were doing "traditional" investing.

We are currently selling our Provo duplex and rolling that equity into another house hack and an STR.

I'd love to connect and chat more about house hacking and RE in general.

Jackson Smith · Answer

Wow! All you guys are amazing and came with awesome advice! Thanks so much to all of you. Since a recent BPP episode with Andre Haynes, I’m gonna check out the NACA program and see if I might be able to snag my first property with 0% down with that. Hopefully the rise in interest rates will begin to lower competition a little bit in Salt Lake, cuz it’s been ridiculous the last 2 years. I’ve been eyeing some single family homes with basement apts and other multi families around the valley, so after our lease ends in June, we’ll hit the ground running.

Leo R. · Answer

If you house hack or BRRR, understanding the neighborhood and the rental market in your area is pretty critical.  If you're not yet familiar with the various rental markets around SLC, I'd suggest talking with an experienced realtor (a realtor who has experience being a landlord around SLC), or an experienced landlord/investor who understands the rental dynamics...  understanding this will help ensure that you can finance future deals (because the rent income you get from your first property will impact your financing for the 2nd property, which will impact the financing for the 3rd property, etc., etc.).

If you're a beginning investor, all other things being equal, house hacking is probably a better place to start than BRRR'ing (because house hacking tends to be more straightforward with fewer moving pieces and often less risk).

In my experience, it's also been critical to have a realtor and a mortgage officer who both understand real estate investing, house hacking, BRRRing, etc. Let me know if you'd like the contact info for the realtor & mortgage officer I work with (both of whom are excellent).

What to do after youre first house hack?

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