First House Hack, Thoughts?

[Ryan L.]

Hi folks. I have been living at home since graduating from college with a plan to move out by house hacking.

I know this will be a large financial decision that impacts me for years to come and I want some thoughts on my strategy.

I was thinking about either buying a condo/house and renting out rooms, or buying a 2-4 unit property and living in one of the units. I was planning on obtaining an FHA loan to lower my initial investment. I also think it may be a good idea to target a property that may need some minor cosmetic work to get a slight deal (tough in a sellers market, to be sure).

So, do you think I should look for a condo/single family house because of the higher supply and higher appreciation? Or should I look for a 2-4 unit property for the higher possible cash flow? Is there anything I should be aware of or watch out for as a new investor/homeowner?

When I buy next year I should have around 50k saved up. I live in the southeast US. I greatly appreciate your thoughts.

[Dan Guenther]

@Ryan L.

Welcome to the community! 

With a condo you will most likely be paying for HOA and have more restrictions on the rental side of things. As far as financing, there are a lot of factors that lenders look at. If you have decent credit and a steady income, then you can get a conventional loan with 3-5% down. The benefit of this is that when you reach 20% equity, you no longer need to pay the monthly private mortgage insurance (PMI) where as with the FHA loan you are paying PMI for the life of the loan unless you refinance.

If you are willing to sacrifice a bit of personal comfort, I'd recommend house hacking a single family house and using the rent by the room strategy. It's a great way to maximize returns, especially for a first investment!

I'd love to connect and help out with any questions that come up.