Stacking with House Hacking

[Gina Huerta]

Hello. We just got out first duplex. We are house hacking it. With current tenant renting, we pay a little less than half the mortgage with them paying the rest. Our plan was to build our property numbers by house hacking a year before moving on to the next multi and house hacking that, etc. My question is if anyone has done this, how long did it take you? Did you live in it the 1 year or 2 for the capital gains issue? And has anyone done this to buy, hold for a little while and then sell for equity? Does anyone do this just for the equity you can get and keep cash in your accounts or do you just buy and hold? I'm not looking to become a real estate titan. Lol. I just want to be set in retirement. Any advice is welcome. Thanks!

[Luke Stewart]

Quote from @Gina Huerta:

So are you saying you went with SFHs b/c of the capital gains taxing not being worth it? A single family will get you all the equity if you live in it, but a multi only gives you the percentage you live in? Correct? As far as taxing goes.

 Not exactly, when house hacking you are going to get all the equity built up regardless of units, but if you need to sell the first duplex in order to buy the next home (whatever it is), you will still have to pay capital gains tax on the unit that you are renting. You get to defer capital gains in your primary if you buy a new primary and defer capital gains when you sell an investment property to buy an investment. So what he is saying is to sell and buy a bigger one your will always owe a % of the capital gains tax due to the entire property not being your primary. @Gregory Schwartz bought a 4 unit to keep long term, so when he moved out he just bought a new place to live, not dealing with capital gains at all because he didnt sell. He left his equity or did a cash out refi and moved on. So now he owns a 4unit which he rents all 4 units, and lives in a SFH and rents out a room. Not sure why he chose SFH, maybe it was just the next step for him.

Personally I think house hacking works best where your first one you keep long term (even if only a few years). Once you move out, whether it be after 1 year (minimum) or 2 you keep the first and turn it into an investment property (I believe its 1-2 years as a rental before its a true investment property tax-wise). Once it is an investment property then you can sell it using a 1031 exchange which allows you to defer capital gains tax, and use that equity to buy new investment properties. That is a great way to upgrade properties, one duplex buys a luxury duplex or a large multi unit or even multiple SFH. I hope this all makes sense!