House Hacking Multi Family w/Family - What do I need to think about as a Begininer

[Monica Gonzalez]

I've been looking to buy my first rental and want to minimize my risk considering the current housing market.  I own my house and have the low rates that were around during COVID.  With that I approached my sister who is a long time renter if she would be interested in going in on a multi family with me (2-3 doors) with the intention of her living in one unit and paying a portion of the mortgage. I would supply the down payment/closing costs needed. 

I recognize that we still need to look at this from the standpoint of our goals (long term rental with the goal to pass on to our kids) and that it make sense from a finance standpoint rental income.  We will be looking at the Redlands, Loma Linda, Yucaipa area, where we will be lucky if we can break even with rent. 

Q1 - We will have 20% down if needed, but is it better to put the least amount required down and have mortgage insurance? 

Q2 - I'm currently reading @Dave Meyer Start with strategy, he talks about it's not just about money that "you" can contribute to a deal.  How do you quantify "time" into money to ensure a deal is equitable.  

Q3 - What else should I be thinking about? 

Thanks in advance! 

[Derek Brickley]

Hey Monica!

Definitely great questions and the short answer is 'it depends' hahah

1. Unless it is absolutely needed, I'm never an advocate for putting more money down.  Even if your rate was 8% (it wouldn't be) you could still invest those additional funds into the market and average out a better return.  Mortgage insurance probably isn't as costly as you might think

2. Seems like only you would know the answer to that question - if you can work an hour of overtime at your job and get $50/hr, if a deal requires you to mow the lawn or something for an hour shouldn't that be valued the same way (I would argue yes).  Consider how much money you could be making doing something else (or how little money you would accept/hr to do something) and compare that to the actual time spent.
3. Vetting the tenants is always talked about in length but it's going to be so important if you or your sister live there.  It's important to find a place you'd want to live (since you actually will) and then that also tends to be important for marketing it as a rental.