How to go from House Hack #1 to House Hack #2

Question

Hey there! My wife and I got into our first house hack last year, a duplex in Cincinnati. We're trying to decide how to logistically go from this first one, to the next duplex/fourplex. We want to refi out of FHA and into Conventional, so that we can re-use the FHA - but is now a good time to do so? With rates around 6-7%? Or should we wait a few more months to see if rates come back down to Earth?

Also, are there lenders that do no-cost refi's? Is that common?

Thanks in advance!

Also, are there lenders that do no-cost refi's? Is that common?

Thanks in advance!

Andrew Geier · Answer

Hi Bryant,

I'd agree with others to keep the lower interest rate you have with the current duplex is probably the best bet. I am not a lender so forewarning don't take what I or anyone else says here as absolutely correct....but If you do this refinance my understanding is you will have to pay for closing costs again usually 2-3% of the loan value, the application origination fees again, and possibly an appraisal again. Depending on your circumstances there are exceptions to have a second FHA loan.

Anyhow, I'm an agent, investor and pediatric ICU nurse in the Cincinnati area. If you have any questions I may be able to help you with reach out, or just to connect and talk real estate reach out too!

Best of luck in your endeavors!

Jacob Sloop · Answer

Also something to consider,  its not uncommon to ask for a seller concession, therefore lowering your out of pocket...  It's not a guarantee obviously but it is happening more and more..  there are plenty of strategies you can use to lower your out of pocket.

Property is in your personal name it sounds like?    HELOC is decent option to access that equity but just be cautious

Keep looking and don't try to time the market..  if its a deal you like and the numbers work, buy it.

Bryant Sala · Answer

Thanks Devin! I should've noted - our rate with our first House Hack is at 5.25%. But you're right, I will run my numbers to see if we can justify it. We just really want to try and take advantage of the low down payment FHA here in the upcoming year for our 2nd purchase.

Kenny Smith · Answer

@Bryant Sala

ahh, sorry!  I read your post too quickly!  You are correct then..15% down would be needed with a conventional loan for a duplex.

Could always look into doing a single family home (duplex conversion), where you could look for a finished basement with a kitchen or kitchenette, and live in the top floor and rent out the basement.  Not sure if your market has homes that cater to that, but that is how I built my portfolio here in Denver.

Devin James · Answer

Hey Bryant Sala,

I think many people will agree that if you have a low interest rate, then you shouldn't trade that for a higher one. Borrowing at 3% or lower was an amazing opportunity that many people wish they took advantage of.

If you run your numbers and think that your capital can go further by refinancing, then go for it. But it will be difficult to find a deal that justifies letting go of that lower interest rate.

Good luck!

Kenny Smith · Answer

@Bryant Sala

I'd definitely agree with Devin you should definitely not re-fi right now into a higher rate.  Protect that interest rate you currently have.

If you want to use the FHA loan again, I'm assuming it is because you only have to put 3.5% down?  If that's the case, a conventional loan, you can put as low as 5% down.  Yes, it's an additional 1.5%.  But, look at it this way, you'd be paying almost double the interest rate if you re-fied right now.  Off the cusp, I'd say it will only take 1-2 years to pay the equivalent of that 1.5% additional down, in a higher interest rate.  So if you're doing a buy and hold, I wouldn't touch the rate.

If you want to pull equity out, I'd take a look at a HELOC.

As far as I know, most lenders will charge for a re-fi, but you'd to double check with some lenders on that.  Typically what they do is wrap the re-fi costs back into your loan, so you're not paying for anything out of pocket up front.  Besides paying for the re-appraisal on your home, that will come out of pocket.

Best of luck!

Bryant Sala · Answer

Thanks Kenny! That was very helpful. I guess I was under the impression that 5% down Conventional loans don't qualify for 2-4 unit multifamily, we'd need 15% down for that - at least that's what I was told by our lender last year. I'll reach out to a few more lenders to see if we can navigate around that.

Thanks again for your help!

How to go from House Hack #1 to House Hack #2

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