House Hacking Babble

[Ryan H.]

I bought a primary home (condo) in Portland, Oregon in 2019.  I've since refinanced and have a 30-year loan on it at 2.75%.  Expenses are about $1600 per month, and there is no income.  It's a small space and I'm not willing to house hack here.  Although I really don't want to move, I'm at least exploring on paper what it would look like to sell my condo and purchase an owner-occupied duplex to house hack in.

My question is whether this really worthwhile?  If I take the money from the sale of the condo and use some or all of that as a down payment on the duplex, am I any better off?  It seems to me that with home prices as they are in Portland, and interest rates where they are, I'd probably have at least $1600 per month still going out after offsetting my total expense for the duplex with the income gained from renting out one side of the duplex.  I could also keep my current condo (funding the down payment for the duplex via existing savings) and rent it out, but it would probably cash flow negative.

To come full circle, what if I just I remain where I am and continue purchasing new cash-flowing rentals out-of-state (of which I already have two)? Although I could get a low-down payment (as a percentage of the purchase price) FHA loan for an owner-occupied duplex here in Portland, I could also put very little down (in dollars) for an out-of-state rental property.

Curious to hear your thoughts!

[Scott Trench]

I think that rather than a "house-hacking bubble", you are experiencing the "lock-in" effect. 

Essentially, you have all this equity in your home, but to really tap it, you need to sell it, and then redeploy it. The problem is that you'll be swapping out your existing loan at 2.75% with one at 6-7%. Clearly, that's bad math. 

I think it will make a lot more sense for many homeowners and landlords to keep what they have (financed at low interest rates) and sit for a long time, than to redeploy with current market conditions. 

This is my plan. I will probably purchase a home and additional investment properties with huge down payments, or much more cash, because the benefits of leverage are being outweighed by the high interest rates. 

It all comes down to what you believe. But, I think your instincts are good, personally.