Seeking Advice on House Hacking Opportunities Near San Diego

[Allan Pan]

I've been residing in San Diego for 15 years and am currently exploring options to house hack. My ideal scenario involves acquiring a 2-4 unit property or a single-family home with an ADU, enabling me to leverage rental income to qualify for a larger mortgage. I'm prepared to make a down payment of around $70,000, and without factoring in rental income, I can qualify for properties priced between $650,000 and $700,000. The inclusion of additional units could potentially increase my qualification for higher-priced homes, contingent on the rental income they generate. (BTW, I've created a spreadsheet to estimate the rental income required to qualify for specific properties and am happy to share it with anyone interested).

After conducting some research and attending open houses, I found very few properties that meet my financial criteria within San Diego. However, by extending my search to areas beyond, such as Riverside County, I found that $700,000—or perhaps even less—could secure a 4-plex. After about 1 year or so, I could consider buy another 4-plex, using it as primary to take advantage of the lower down payment. This strategy could be repeated.

However, in San Diego, a 4-plex will be 1.5M above and the same strategy would not be feasible. It takes much longer time to save and more difficult to financing the purchase.

Given my remote work situation and the necessity to visit clients in San Diego approximately twice a week, a commute is manageable, albeit not ideal. I am considering relocating to areas within a 1.5-hour drive from San Diego, like Hemet, CA, and am open to suggestions or feedback on suitable locations around San Diego within this driving distance.

[Ryan Thomson]

@Allan Pan I wonder if your criteria may be a little unrealistic for the current market. Although I'm not sure bc you didn't share it. 

I'm guessing you are trying to find something that cash flows. House hacking is tough to cashflow in year one (with current house price run-ups and interest rates) for a couple reasons:

1. You are living in one of the rentable units

2. You are only putting 5% down so your loan amount is much larger and therefore your mortgage payment.

I would consider your net worth ROI. What I mean by this is considering how much your down payment returns to your net worth (appreciation, loan paydown, tax benefits, AND rent avoidance). Don't forget to include rent avoidance in your numbers! You have to live somewhere.

You may need to lower your return or cashflow expectations so you can get into a house hack that will allow you to avoid throwing rent money away every month. You know this, but don't forget all the other ways real estate makes you money. Paying down your mortgage and owning an asset that will appreciate over the long term.