All Forum Posts by: Deric Allen

@Deric Allen, House hacking is an incredible way to get into buy and hold real estate investing with a relatively low financial barrier to entry… plus the added benefit of reducing housing costs!

As far as loans go FHA is not your only route. There are conventional loan products like HomeReady and HomePossible which may actually be better for your first property (and have a low(er) down payment option).

You could purchase the first property with the 5 percent down "home possible" conventional loan, and then purchase the second property with you FHA loan.

Game Planning for multiple house hacks can get a little tricky… which is why it’s imperative to work with professionals who know what they’re doing!

The easiest, fastest, and best way to get answers to your questions will be to sit down with a lender (or 2 or 3). They're not scary, I promise. They're there to help you. Write your questions down and ask ALL OF THEM! Asking all of these questions will also help you determine if they know what they're doing when it comes to working with house hackers. Believe it or not, they want to help you and lend you money. They're looking for ways to lend you money, not excuses not to lend you money. If they are able to get you to qualify for a loan, and you use them as a lender, they get paid. They want to give you money.

Keep in mind, if you are using a low down payment, it's not really realistic to expect to be cash flow positive while you’re house hacking / in the house hack. When an investor is looking at being cash flow positive, they are typically putting down 20-25 percent or more. If you are in a high-demand metro area, it's simply not realistic to expect to be cash flow positive while in the house if you are putting down 0-10%. However, the property must cash flow after you move out for the deal to make sense (in most scenarios).

Good luck on your journey and feel free to reach out if you have any questions!

Hi Deric, I agree with everything Zach said. FHA is a great option as it allows you to buy a property with only 3.5% down which is huge. The "watch out" for FHA is that many Sellers prefer Conventional Financing for several reasons. FHA buyers often have lower credit scores and capital reserves (not always but often) which some feel make them riskier with a greater propensity to not close. Another perceived detractor is that FHA loans come with an inspection requirement. The FHA appraiser also does an inspection and can require repairs in order for the loan to be approved. For these reasons Sellers often prefer Conventional financing over FHA. With that said I have closed several FHA multifamily deals this year. You just have to get creative with your offer and make it appealing in other ways. I am a real estate agent in CT and specialize in multifamily properties. Feel free to reach out anytime for no-obligation advice.

Doing the house hack puts you into a good spot, because you can use loans for a primary residence. Anything Conventional, FHA, VA is going to get you into a property from 1-4 units. If you are looking for low money down, check your states down payment assistance programs. Ohio has some that allow duplexes depending on the type of loan. When looking for down payment assistance, check to see if it is a grant (don't need to pay back) or a 2nd note (do need to pay back).

When looking at the type of loan, ball park your credit score and how much you want to put down, then the loan will show itself. Conventional above 80% LTV will have the PMI and an FHA will always have it. Figure out your back end debt to income ratio so you know what you can afford. You can use 70% of rent as income. Put all this together and you can have a productive conversation with a lender and feel more confident.

@Connor Kerr makes a great point.  Check out all of your options.  There are conventional loans that are 3-5% down too and also mass housing which is a 0% down loan.  Heck if you a little more rural like Gardner area you can use a USDA 0% down loan.  Welcome to BP.  Its a great place to be

First of all welcome to BP and congrats on actively trying to become financially free! When I was looking at my first (and only) property I wanted to do a househack. I kept hearing about how you can get an FHA loan for multi families up to a quadruplex as long as you live there for a year minimum. I thought that would be awesome! What I later found out was that (One: the bank does not count the projected rental income as part of your income. They only do when you get a conventional or investing loan. (Two: Just because you have the down payment for let's say, a quadruplex, that doesn't mean you'll be able to afford the monthly payment. For example, when I was looking to get preapproved, I could afford an 80k loan with FHA. In 2021, there's no way I could find a halfway decent multifamily for 80k. So I asked what I could get with a conventional loan, which would've required a 15% down payment with the lender I was using. I was able to get a property worth up to 150k. I decided to go the conventional route because with my savings at the time and my extremely average income level, that's what made sense to get me into a duplex.

Hope this helps in some way!

3.5% down is an owner occupant loan. You and your wife would not be able to both have one unless you're planning on living separately. Mortgage lenders randomly send people out to these properties to confirm they are in fact at least partially inhabited by the owners. A 4 plex would be your best bet to use this strategy. 

Yes most owner occupied is a minimum 1 yr living in residence. So I'm going to follow that and make sure after the first year we'll go after the second building and reside at that one thru the same steps. This follows the agreement but gives me that extra push .