House Hack - FHA - With One Time Close / Design Online with Pricing???

Question

I’m going to Build a new QuadPlex and House Hack.

What is a descent price range for a new build with purchase of the land, build, permits and all that included?

Can I base the pricing of the project from comparable recently Sold Homes that are New in the area?

I’m going to Build in the Finger Lake region. Preferably Conesus Lake area or Canandaigua Lake.

This will also be a FHA with a one time close.

The plan is to hopefully get instant appreciation after the build, and then put a down payment on another property with a conventional loan. And then BRRRR from there.

And what do you think of this idea? I think new is my best bet…Also what does a property usually cash flow after maintenance and all that? Let’s just say I rent each apartment for $1500 each.

Please be specific if you can and break it down for me.

Thanks!

Andrew Postell · Answer

@Matthew McManus what you are trying to do here is really hard.  Nearly everyone learns that this cannot be accomplished but maybe you can get it done.  Let me answer your questions one at a time here if you don't mind:

What is a descent price range for a new build with purchase of the land, build, permits and all that included? - what has your builder said?  This is a question for your builder.  And frankly, this is where most people learn that building a property like this will be impossible.  Once you find a builder, you will learn that you are paying a premium for a custom built home that will be over the price of just going out and buying a pre-existing home.  However, to learn the answer - ask your builder.  If you don't have a builder - then your first step is to find one.

Can I base the pricing of the project from comparable recently Sold Homes that are New in the area? - this is a question for your lender.  Your lender should be able to tell you what comps would be used in determining value.  And the answer is "other, new built, Quad homes".  If there are no "Newly Built, Quads" then there is no way to determine value and thus the property would be unlendable.  Comps are VERY important to FHA loans.  A single family home is not a comp to a 4-unit.  A home that is 50 years old is not a comp to a new build.  Your lender should be able to answer this question in detail.

Also what does a property usually cash flow after maintenance and all that? Let’s just say I rent each apartment for $1500 each. - The answer here is $0.  You will not cashflow on a property of this nature.  Nor will you cashflow on ANY property that you househack.  And that's ok.  Keep in mind that house hacking REDUCES my cost of home ownership. You will NOT cash flow on any property that you purchase. I'm not sure if anybody has said anything different to you but I need this to be your expectation. Remember, you are occupying one of the units...it would be impossible to cashflow in that scenario. Ok, maybe if you rented out each room and maybe did everything Short Term or something like that. But if it's long term renting, then you won't cashflow. But it will still allow you to afford a SIGNIFICANTLY higher price point than if you did not house hack.  And that's exactly why we do this strategy.

So, if real estate appreciates 5% per year, then a $500,000 will be $138,000 higher in value after 5 years and a $1million home will have $276,000 in value increase after 5 years. That's higher our value, the higher the equity gain is - even if the % of gain is flat...the dollar amount is higher because the property is worth more. That's how house hacking helps us gain wealth. We certainly aren't gaining $276,000 with $200 of cashflow. So, don't sweat the "no cashflow" thing.  Just focus on purchasing a good home that you feel comfortable with living in.  Your commitment is to live in it for 12 months...and then you can do it again and again!

I hope you don't mind me being this direct on these things but you'll find these things out eventually.  I started out my career with house hacking.  I firmly believe it in.  There's nothing wrong with just going out and buying a pre-existing home and being a multi-millionaire from real estate.  If you do learn that you can't build...you're still going to be just fine.  And maybe you will learn that you CAN do it.  But go and ask your existing partners those questions and you'll see if it's possible.

Hope all of that makes sense.