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Updated about 10 hours ago, 01/01/2025
House Hacking in expensive markets - MA and RI
Hello! I am a new investor looking to purchase my first property in Massachusetts or Rhode Island. I have built up enough savings to purchase a multifamily property with an FHA (3.5% down) loan or Fannie mac (5% down) loan. I would like to house hack as my first real estate purchase/investment.
My question is, in today's market, is house hacking still a good option? I am ok with the property not cash flowing right away, but I would like my living expenses to be minimized by a lot if I am house hacking. Ideally, I'd like to live in the property for 1-2 years, and keep it as a long-term rental property when I move out. Therefore, the property would need to cash flow when I move out and rent out all units.
Any thoughts and/or advice is greatly appreciated, thanks!
@Tim Holt It's absolutely worth it. In fact, I think it's the most viable option for real estate investing today. But I am bias, seeing as I have been house hacking for the past 5 years. In that time, I've purchased two duplexes in Beverly, MA. Cash flow is realistic, but quite frankly you make your money here in appreciation. I thought I was buying at top of the market in 2020...and 2022...but prices continue to remain high.
You have to think about your goals and whats important to you here. I tell people if they can match their current rent or do better then it's likely worth it, but you may need to get creative on the cash flow part if you only plan on living their a year or two. Maybe do the by the room strategy, or STRs. The world is your oyster. But 1000% yes it's worth it.
@Tim Holt, Yes INDEED house hacking is the best option for most 1st time buyers. The question to ask is: Is my housing cost better by househacking vs renting. Small multi-family property is where I would start. If you are single or married with a small child, buying a duplex or 4plex should work well. Usually living in it for a few years may be enough for it to cash flow positive when you move out.
Once your property is cash flow positive then you have tenants buying your property for you. It may even take a 3-5 years to get cash flow positive but if during that time it is cheaper to own monthly, than pay rent, you are way ahead. Remember there are 4 ways you are getting ahead by owning a small multifamily property (houeshacking initially).
1. Monthly housing cost less (due to tenants paying rents in the other units)
2. Principal buy down that occurs with each payment met.
3. Property appreciation that you realize that you don't get if you rent.
4. When you move out you begin to experience POSITIVE CASH FLOW in which your tenants help you buy the property.....where eventually you own it out right, and now it becomes like a pension..........Predictable and Sustainable income for life.
This is one of the last investments that the common man or woman can make and get ahead in life. Good luck.
@Tim Holt Come February, it's legal to create an ADU by-right on any single family property in the entire state. I feel like this may be the best opportunity for house hackers as there will be some early adopters who capitalize on it because you can basically turn a single into a multi. You can find SF properties that already have in law suites, garage units, etc, and now legally rent those, so it should increase the appraised value significantly. I'm kinda surprised more people aren't talking about it because it's a fairly transformative law, allowing investors to create ADUs as well. Anyways the link is below of you want to take a deeper look, feel free to connect if you want to chat more about it!
https://www.mass.gov/info-details/accessory-dwelling-units-a...
- Tyler Munroe
Quote from @Daniel McDonald:
@Tim Holt It's absolutely worth it. In fact, I think it's the most viable option for real estate investing today. But I am bias, seeing as I have been house hacking for the past 5 years. In that time, I've purchased two duplexes in Beverly, MA. Cash flow is realistic, but quite frankly you make your money here in appreciation. I thought I was buying at top of the market in 2020...and 2022...but prices continue to remain high.
You have to think about your goals and whats important to you here. I tell people if they can match their current rent or do better then it's likely worth it, but you may need to get creative on the cash flow part if you only plan on living their a year or two. Maybe do the by the room strategy, or STRs. The world is your oyster. But 1000% yes it's worth it.
Thank you for your thoughts Daniel. I definitely want to have that long-term mindset and buy a property/house hack that focuses on appreciation, but can also generate some positive cash-flow after I move out. And to your point about home prices, it seems like they will remain high in the Northeast area moving forward.
Thanks again!
Quote from @Joe Scaparra:
@Tim Holt, Yes INDEED house hacking is the best option for most 1st time buyers. The question to ask is: Is my housing cost better by househacking vs renting. Small multi-family property is where I would start. If you are single or married with a small child, buying a duplex or 4plex should work well. Usually living in it for a few years may be enough for it to cash flow positive when you move out.
Once your property is cash flow positive then you have tenants buying your property for you. It may even take a 3-5 years to get cash flow positive but if during that time it is cheaper to own monthly, than pay rent, you are way ahead. Remember there are 4 ways you are getting ahead by owning a small multifamily property (houeshacking initially).
1. Monthly housing cost less (due to tenants paying rents in the other units)
2. Principal buy down that occurs with each payment met.
3. Property appreciation that you realize that you don't get if you rent.
4. When you move out you begin to experience POSITIVE CASH FLOW in which your tenants help you buy the property.....where eventually you own it out right, and now it becomes like a pension..........Predictable and Sustainable income for life.
This is one of the last investments that the common man or woman can make and get ahead in life. Good luck.
Thanks for this thoughtful response Joe. That is exactly my mindset when analyzing properties so far, will this be cheaper than renting. Even if my cash flow is negative while I live there, I will still be enjoying all the long-term benefits of owning real estate and my living costs will be cheaper than renting if I choose the right deal/property.
I appreciate the insight!
Quote from @Tyler Munroe:
@Tim Holt Come February, it's legal to create an ADU by-right on any single family property in the entire state. I feel like this may be the best opportunity for house hackers as there will be some early adopters who capitalize on it because you can basically turn a single into a multi. You can find SF properties that already have in law suites, garage units, etc, and now legally rent those, so it should increase the appraised value significantly. I'm kinda surprised more people aren't talking about it because it's a fairly transformative law, allowing investors to create ADUs as well. Anyways the link is below of you want to take a deeper look, feel free to connect if you want to chat more about it!
https://www.mass.gov/info-details/accessory-dwelling-units-a...
Thank you for sharing this Tyler! I was not aware of this law that will be in place soon. I'm going to take a look at the link you sent and will be sure to connect with any questions. Thanks again.
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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You appear young, Tim. If so, then yes this is quite a solid option. I would hesitate to say 1-2 years to rotate out but closer to 5 years, and ideally I'd try to get the downpayment higher to at least 10%.
I understand your areas though-- they're expensive. It's a low barrier to entry and a good option for you, I would highly and I mean highly recommend you focus on location. If you really want to do this right, be a bit scrappy buy the ugliest in the best neighborhood and slowly fix it up over the years.
Imagine buying the worst triplex in the best area. Living in the worst unit each year and fixing it up-- the equity gain is just going to be phenomenal. You will reap the rewards.
Quote from @V.G Jason:
You appear young, Tim. If so, then yes this is quite a solid option. I would hesitate to say 1-2 years to rotate out but closer to 5 years, and ideally I'd try to get the downpayment higher to at least 10%.
I understand your areas though-- they're expensive. It's a low barrier to entry and a good option for you, I would highly and I mean highly recommend you focus on location. If you really want to do this right, be a bit scrappy buy the ugliest in the best neighborhood and slowly fix it up over the years.
Imagine buying the worst triplex in the best area. Living in the worst unit each year and fixing it up-- the equity gain is just going to be phenomenal. You will reap the rewards.
I appreciate the advice and thoughts V.G. I definitely like your ideas of focusing on location and trying to get my downpayment closer to 10% rather than 3.5%.
The way I see it is you're comparing two options, to HH or not to HH. If the marginal cost increase in buying a house that can be house hacked (a house with a basement, a duplex, etc.) is less than the rents you expect to bring in from renting the additional space, why not do it? Not to rely on speculation, but it should get better over time (hopefully) not worse.
If the marginal increase between the two options is only a few hundred bucks and that isn't worth a few hundred bucks to you, then maybe not worth it. Run the math and see what you think.
@Mackay Oakey Thanks for the thoughts!
Currently in my first house hack . It's an awesome way to jump into RE yes its scary at first but as long as you have a criteria going in it eases some of the emotions during the process my biggest thing was lower my cost or keeping it the same. Right now I'm over $100 than I wanted but that's fine because once I rent it out fully I know I can cash flow about $500 or more. Make sure to check in with some lenders because they can find you grants to help with closing cost.
Quote from @Jerell Edmonds:
Currently in my first house hack . It's an awesome way to jump into RE yes its scary at first but as long as you have a criteria going in it eases some of the emotions during the process my biggest thing was lower my cost or keeping it the same. Right now I'm over $100 than I wanted but that's fine because once I rent it out fully I know I can cash flow about $500 or more. Make sure to check in with some lenders because they can find you grants to help with closing cost.
Thanks for these thoughts Jerell!
