Building a New ADU - House Hacking Strategy

[Andrew Emery]

Hi All,

I'm currently in the process of refining my house hacking strategy, and wanted to run it by you all to get feedback / thoughts on some of the questions I have.

My plan was to use an FHA loan to owner-occupy a 2-4 unit MFH. However, the area I'm interested in has recently relaxed zoning restrictions for and actually incentivized ADUs in many neighborhoods. While I was originally planning on househacking by living in one unit and renting out the others, I've become very intrigued by the idea of building an ADU (probably a tiny home) on the property and renting out the primary MFH.

My questions for the BP community are:

- Does this sound like a reasonable plan (assuming I'm willing to live in the tiny home which I am and that I can find an existing MFH that meets the zoning / parking requirements, location, neighborhood, etc.)?

- How would you recommend financing this? I was budgeting for 75-90k as the down payment on a 600k-700k MFH alone before this idea, but now I'm thinking of putting a minimum DP on an FHA for the MFH and paying cash for the ADU - but I'm not familiar with the feasibility of this from a loan perspective or if there is a more strategic way of going about this.

- With 11 more months on my current apartment lease, do you have any advice on a timeline / sequence for all of this? Should I engage the ADU builder as soon as possible or wait until I actually purchase a MFH before starting those conversations?

- If I went down this path, how would you most effectively get into the next property - refinance the whole property after a year since it would now be appraised with an additional unit and would potentially get me out of an FHA and into a conventional (with hopefully slightly lower interest rates by then?

Thanks everyone - any insight is much appreciated!

Andrew