House Hacking Weaverville, NC

[Will Morrison]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $406,800
Cash invested: $44,296

The Deal
My wife and I recently closed on a property in Weaverville NC that will serve as our next house hack (HH)! If you don’t know, House Hacking was originally coined by Brandon Turner of Bigger Pockets. It is essentially sharing a property with tenants whether that is a room, basement, adu, etc in which their rent supplements the mortgage. Other benefits might include tax write offs, increasing your debt to income ratio, and being able to buy investment properties for as little as 3.5% down.

Strategy
For this one, our strategy was to find a property that had two separate spaces and was located in an area that we could see ourselves living in. The property that we ended up purchasing has a basement separated from the upper level by a staircase. For us, separate spaces are key to a sustainable HH. I'm all about the HH where I see the tenants outside on walks rather than in the kitchen..

Depending on where you live, it can be fairly simple to find a property that fits the spacing requirements, however since the property will also be the owners primary residence, the location is often important. This property is located in Weaverville, which is desirable in the sense that rent demand is high for both STR and LTR. The area also has parks, food and a small downtown.

Since this property has stairs leading to the basement, our plan is to remove them and add a bathroom upstairs in the space. Although this is an irreversible move and might change the resale in the future, I believe that it will only have a positive effect. Adding a bathroom upstairs will increase the functionality of the space and add value. In my opinion, as property values continue to rise, house hacking will become a more normal and desirable home trait, especially when the leading home buyers are younger Millennials and Gen Z who have likely seen strategies such as these on the interent. We have to get creative to afford what we want. Besides, HH are not just homes, they are money making machines. This is a tempting sales pitch to the right buyer.

Financing
We are financing this through private financing, and are planning to put a sum towards downstairs improvements to increase rent potential. The great thing about house hacking is that it can be achieved through a variety of loans. FHA is one of the most tempting options as it is a primary residence loan in which you can put as little as 3.5% down. There is a catch though: the potential for permanent PMI payments. For that reason, I see clients opt for conventional loans in which you can put as little as 5% down. This is what we did for our first house hack. It's whatever works best for you with your current financial situation. Once you purchase your first property, many investors choose to take out a Home Equity Line of Credit (HELOC) to help with the next down payment. There are so many creative ways to finance a deal!

Numbers
When I run numbers on HHs I like to look at a couple different scenarios. For this specific property, it can be a STR, MTR, LTR, or HH. When running the numbers, I choose to create a spreadsheet for each rental scenario so that I can understand my property's potential while I'm living there and after I move out. In my opinion, STR income is typically the most risky, however it offers the most income potential. LTR is typically the most conservative and more of a guarantee of monthly income. As a HH, I hope to use whatever income the property produces to cut into the expenses as much as possible. As far as I am concerned, while I live there any income I get to go against home expenses is a win.

Closing Thoughts
We are fortunate to piece a deal together with so much potential in an area we like! If you are planning to purchase a home as an investor, consider househacking as it can lower one of your biggest monthly expenses. As an agent I’m happy to share my resources or help talk through deals for anyone interested in investing.