House hacking vs out of market

[Kae M.]

2021 Goal is to grow to 10 doors from 1, investing for cash flow.

I currently own 1 rental in San Diego that breaks-even because I stuck my retired parents in it, it's 60%LTV with $320k mortgage, worth $545k.

I rent in Los Angeles, $2,100 per month but am considering putting 5% down on a vacant 3 unit property to house hack that has the following:

2 bd/ 1.5 ba front house

2 bd/ 1 ba back house (1 bedroom is un-permitted per title reflecting this as a 1/1) - will rent for $2k

1 bd/ 1 ba adu - not sure if it was permitted - will rent for $1500

$850k with 5% down, Mortgage will be $4600

This seems like the best next step except the unpermitted aspects give me pause.

I pulled $100k out of my San Diego home to consolidate my student loans, but have yet to pull the trigger as I’m considering ways to put this cash to work and arrive at paying those off with the proceeds. This means I still have $800/ mo student loan payments.

I make $80k base salary and have $60k in savings

So in total cash I have $160k to do deals at the moment. Any advice on what the best path forward is to help me out of analysis paralysis and start growing?

1. Continue renting and invest for cash flow out of SoCal

2. House hack at $850k plus, considerations?

Your input is greatly appreciated

[Kyle J. Cooper]

@Kae M.

Great work! You've done your research and it sounds like you've already made up you mind about house hacking. There are few REI strategies that can give you the ROI that house hacking can bring. I'd suggest moving forward with house hacking your living situation regardless of what you do with other rentals. The low down payment aspects of house hacking keeps those barriers of entry low and your CoC return high! You'd still have enough cash for a down payment on a LTR even after house hacking, you just may need to look outside of your current market as you mentioned.

If this deal will allow you to live for free in an expensive market then I would be making an offer asap! Be sure to keep a contingency around that extra bedroom that isn't permitted that could throw your numbers off for potential rental income. You are coming from a position of financial strength, even though you have a lot of student loan debt. Unless your interest rates are higher than like 10% I would be putting your funds to better use(house hacking, LTR, BRRRR, etc). Keep taking action you're so close you just have to take those first steps and you'll reach your goals! Cheers!