SFR or small multifamily??

Question

I keep going back and forth between buying a sfr and renting out by the room or house hacking small multi-famly. Preferably my family and I would like to have our privacy with small multifamily so that would be ideal but we are open to either. In Phx, AZ it is rare to come across a multifamily that doesn't need work that is in our price range and this is why i keep reverting back to SFR. Any insight and/or advice is greatly appreciated.

Tommy Loretz · Answer

@Alfredo Navarrette, I am currently house hacking with an SFR that includes a separate entrance studio. The studio is operating as a medium-term rental, and we have had a lot of success with Furnished Finder. With a young child, sharing rooms in the primary residence was not an option but this allows us to have a safe and secure home while also improving our financial position.

Bob Stevens · Answer

There is no right or wrong answer it's all depending on where you want to live, and the numbers,

Scott Crowley · Answer

Hey Alfredo!

I have the exact same conflictions in my area with this strategy, so I feel your struggle!

Everyone has already provided excellent suggestions, so, I will just add that I am currently in the process of purchasing a new SFH on a seller-finance deal. I am doing so for numerous reasons, but for what pertains to your situation, the house I am moving into has an unfinished basement. This unfinished basement actually has a back door that leads straight to it without having any common areas to walk through with the main floor residents(my family). While I am not quite to the point that I could say it would be financially reasonable to do this, it presents an opportunity to finish the basement and turn the property into a duplex. Of course, checking with local goverment and obtaining necessary permits is always a must.

Hopefully that helps stimulate some more creative thought on how you could take a new SFH and still turn it into an awesome hack. Personally, if you have the capital to do so and you go with the SFH route, I am all about adding or converting something to an ADU, such as a detached garage. Gives you more privacy and likely a better tenant experience than being in the same residence.

Jevon Shaw · Answer

In addition to the options @Michael Dumler mentioned, you could also consider purchasing a SFH, then buying a tiny home to rent STR or LTR and putting it on your land. You'll need to check with your local government on restrictions and zoning.

Michael Dumler · Answer

@Alfredo Navarrette, I've mentioned this time and again to those looking to house hack, start including in your search criteria homes that contain an in-law suite, ADU, or finished basement that can be sourced as an STR via AirBNB. Rent by the room is a suitable option, but as you've mentioned, dealing with roommates is a hassle. As a real estate agent, you should be able to filter these aspects on the MLS so that you're only receiving listings that meet your criteria. Otherwise, you're most likely going to have to source small multifamily deals off-market. Hope this helps!

John Bocelli · Answer

I would suggest going with the multi-family house hack approach, especially if you have a family. As others have mentioned, you can use 75% or so of the projected income to qualify on the small multi-family loan, the income may cover most if not all of your mortgage, and it will most likely provide better cash flow when you are ready to move on to your next property. SFR with room rentals could work but may be a big hassle now and may not provide much cash flow later if you rent it as a conforming unit once you are ready to move on.

Michael Dumler · Answer

@Alfredo Navarrette, @Tommy Loretz, there you go, this is exactly what I'm referring to. House hackers need to get creative given current economic conditions and vast competition. The traditional house hacking of 2-4 units is much more difficult to come by these days.

Devin Ryan · Answer

@Alfredo Navarrette, please keep in mind that going with a multi-family will allow you to use 75% of the projected other units rental income to help with your qualifying as well. If this is not a factor to you, then please disregard. Additionally, a 203k/rehab loan could absolutely be a solution to your problem of having multi-families that need work. It could be a viable option for you to take.

SFR or small multifamily??

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