Newbie trying to house hack SD, possible?

Question

Hi friends! I’m ready to buy my first property and I’m in love with the idea of house hacking. From what I’ve personally seen and analyzed so far, nothing provides cash flow, even with renting ALL units. Nothing comes near meeting the 2% or 50% rule. Has anyone had recent success house hacking SD? How long did you have to wait to find “the one”? Is it realistic to expect positive cash flow or should I be happy with personally paying some monthly mortgage out of my own pocket? All tips and advice welcome! :) Thanks in advance.

Kenneth Donaghy · Answer

@Rabekah Siatunuu I agree with my friend @Christian Ballow If you wait for the one, you will be waiting. How I coach my clients is helping them see what househacking strategy works best with their budget and lifestyle. Coming out of pocket for a portion of your mortgage while your tenants contribute the rest of the mortgage is still winning! Plus its so much better than coming out of pocket for rent. Multiple Base hits also score runs. I have some clients who started small, househacking condos, then a townhouse on the next purchase a year later, because rents increase every new tenant, they now cash flow having both properties renting by the room. I have other clients whose budgets were higher where the goals was to get a 3-4 unit property and not to come out of pocket more than 2k/mo for their unit. So the spectrum of the househacking strategy is wide, my goal for my clients is to help them take into consideration, their budget, and match with the lifestyle, desired location, and personality and work together to fit a strategy to reach your goals, not just on. your first property, but many more to come. You will learn so much on your first one, to take into the next.

Rabekah Siatunuu · Answer

Thank you everyone who has responded so far!Seems I was too hung up on the cash flow aspect, but it’s unrealistic to expect cashflow in first year with first property.At this time, I should change my mindset from cashflow, to getting my money out of the black hole that is Rent. Cash flow will come with time and perseverance :) I have new analysis to do to see what works with my budget! As well as see if my current desired niche/strategy has changed with this info.Thank you all so much!

Christian Ballow · Answer

Hi @Rabekah Siatunuu, great questions! I currently live in a house hack in San Diego. My first house hack was just a SFR that I rented all spare rooms to friends, I was able to decrease my housing costs but was still out of pocket just a bit. As of recently, my strategy has been to use ADUs as part of my house hack. I am now beginning to break ground on my 3rd and its worked very well the 2 times before this. What I do is look for a great SFR on a 6,000+ sqft lot then I move in with a roommate, in this case my gf. Immediately after closing I submit plans for the ADU, this could be a simple garage conversion up to multiple ADUs on one property. Once completed, I BRRR into an owner occupied loan and typically cover all of my mortgage costs and expenses. I hope to do this once a year. My first house hack was just a SFR that I rented all spare rooms to friends, I was able to decrease my housing costs but was still out of pocket just a bit.The short answer to your questions above:-Yes, I have had success but it is not as easy or straight forward as other markets'-I've never found "the one," I've always just looked for one that checks enough boxes to make it work. Then I force it to work through my ADU strategy.-I would say it is not realistic to expect cashflow but you should take into account the benefit of paying down your mortgage with the assistance of roommates. As opposed to paying someone's mortgage with your rentHope this helps, good luck! Feel free to reach out with any questions

Alan Asriants · Answer

@Rabekah Siatunuu I am not sure about the SD market but from my understanding you have to be really creative and sacrifice certain luxuries to benefit from higher cash flows (rent by room, ADU, etc). Maybe this is possible in your market, but it my market it is also becoming near impossible to find multi family deals that cash flow with an FHA mortgage. You might be breaking even or making a couple hundred bucks a month on a 400-500k Multifamily. That being said, it is still worth it. If you are able to rent out the other portion of the building and live in your unit for near what you would rent it for it still makes sense. The reason it makes sense is because you are no longer throwing money away on rent, the mortgage you pay is actually paying down your principle thus increasing your equity, you have multiple tax advantages now that you own a rental property which will actually save you more money when you file for taxes. Hope this helps

Mark Frattini · Answer

Due to the low inventory in San Diego, it may take some additional time for you to find the right property. Typically, it takes my clients anywhere from 30 to 90 days to find the right home and get an accepted offer. The percentage rules that were established previously are not applicable to the current market conditions. Especially in a competitive coastal market like San Diego, LA, SF etc.Are you open to the idea of purchasing a single-family home and renting out the additional bedrooms, or are you only interested in a 2-4 unit building? For first-time buyers, the number calculations generally work out better with a single-family home purchase.

Twana Rasoul · Answer

@Rabekah Siatunuu House Hacking is the best way to get started in San Diego...I currently have house hacking properties in escrow from Encinitas (House with ADU) to La Mesa (duplex) to Clairemont (duplex) and a few other off market ones in the works. Depending on your expectations whether you are wanting to live in an area like Encinitas and just offset a portion of your mortgage with an ADU or you want to be more aggressive and get into a duplex or 3 or 4 unit and offset more than half or move of your mortgage. initial cashflow is difficult in a place like San Diego without value add of updating units or adding units/ADUs but long term cash flow is pretty incredible. Using the 1% or 2% rule here in San Diego is not realistic and might be more realistic in other states or markets.

Ryan Thomson · Answer

Good word! Glad you are seeing the light :)

Kenny Simpson · Answer

@Rabekah Siatunuu there is deals happening everyday. Having the right team and guidance is what you need at this point. San Diego is great for value ADD, properties with under market rents, adding ADU's, STR and building equity. There are many sub markets in San Diego, some for cash flow, some great for equity plays and it really depends on your goals which option is best for you.

Steve Meyers · Answer

@Rabekah Siatunuu two of my friends purchased duplexes one in mission beach and one in normal heights both live in one half and rent the other half on air bnb and cover the majority of their mortgage every month. Another option is renting out rooms to travel nurses or military both get stipends for housing. Once you figure out who your ideal renter you want to target is then I think you will have a better idea of what type of house hack you want to do. Renting to friends as long term tenants works too but if you want to maximize cash flow looking at STR or mid term rentals might be the way to go. If you'd like to chat further about different ideas shoot me a message.

Clayton Silva · Answer

@Rabekah Siatunuu in SD, I would expect to pay a portion of the mortgage yourself. The goal is to own the asset for less than the cost of rent. If you currently pay 2500/month in rent, the goal ought to be to pay less than that in your portion of the mortgage. (Example mortgage of $4000/month but tenants pay 2500. In this example you pay 1500 but that's less than 2500 you'd be paying in rent plus you own the house + appreciation+ tax write off for interest expense). House hacking is the best way to get started in CA.