Existing primary home and house hacking

[Account Closed]

Hi everyone,

My wife and I live outside of Reno and we have a primary home with a conventional loan at 2.5% interest. Two months ago we lost our youngest daughter and have hit a point we need to escape our hometown for a while. Search for purpose in life I guess. Either way we have money to invest but with the current state of the market and lending, we are holding back. However there is a sense of urgency to leave. We would like to house hack somewhere for a year but then return to our home here in Nevada. Finally the question. Can I still get approved for an FHA primary home loan with an existing conventional loan of my primary? If I just rent the our current home out and move, can I deem it as a secondary home? Any assistance would be helpful to a couple of broken people. Thanks folks.

[Ryan Thomson]

I get this question all the time right now with my house hacker clients in Colorado Springs. It’s a common fear so you are not alone. Here are some helpful ideas to think through.

When House Hack Investors are concerned with current interest rates its usually for one of these reasons:

1. They are overly focused on the short term expenses, risks, or one year returns
2. They are under emphasizing the long term financial benefits and upside potential
3. They are worried about being able to afford the payments
4. They are a product of education from 2018-2022 that overemphasized cashflow and quitting their job early

What might happen in the near future (whether you buy or wait)?

1. Maybe rates keep going up. You’ll be glad you bought.
2. Maybe rates stay the same forever.
3. Maybe rates drop. Competition increases because more people can afford a home. If interest rates fall it is one factor that puts upward pressure on home prices.
4. Prices may drop
5. Prices may go up

What is true if you wait?

1. You lose out on potential appreciation and loan paydown
2. If renting, you throw money away on rent

What is true if you buy now?

1. You create opportunity for yourself. You’ll be eligible to buy another house hack sooner (multiplying your net worth building machine).
2. You can refinance if rates drop in 6 months to a year. You now own a home that you bought when the competition was lower. You bought when it was easier to get concessions and homes for under asking price.

Risks to buying now?

1. Home prices decrease after you buy (always a potential risk). Mitigate: The massive shortage of inventory for sale right now is currently putting a floor on how far prices can fall. Over the long run, real estate historically goes up.
2. You can’t afford the mortgage. Mitigate: Save up reserves. Get a job with more pay. Or buy a good house hack where enough of your mortgage will be covered by tenants.
3. You lose your job (always a potential risk). Mitigate: Have reserves. Have a good house hacking plan where tenants cover most of the mortgage.

If you can handle those risks and you are in the real estate/House Hacking game for the long run, buying a home now can be an excellent long-term investment. It will put you in a much better financial situation down the road. It's hard to find an investment that returns a better ROI than House Hacking (even if cashflow is negative).

There are so many unknowns when buying a house in any market cycle. Put the known and experienced facts that people have continued to realize for decades in the United States are:

1. Real Estate is a fantastic investment
2. No one regrets buying real estate 10 years later
3. There is no bigger builder of wealth for the average American
4. There is no perfect time to buy!