I think that you have to take what the market gives you when it comes to house-hacking.
The problem is:
A traditionally financed low-down payment house-hack with traditional long-term rents simply won't cash flow during occupancy, or after, in many MCOL-HCOL markets in the US.
95% leverage at even 5.7% just won't work in a lot of cases right now. Hard to produce cash flow or break even with that much debt, at that rate.
House-hackers, however enjoy certain one time (non-scalable) advantages that should be taken advantage of in the early days:
- They can assume pre-existing debt like VA and FHA Loans (rather than take it on Subject-To which is dramatically riskier).
- They can rent by the room and self-manage to produce day 1 cash flow.
- Many of these HCOL areas also have strict limitations on AirBnB or short-term rentals... that do not apply to owner-occupants - thus allowing for extreme cashflow potential for house-hackers. If no one but owner-occupants can STR... then that should mean opportunity for owner-occupants who STR their primary residences in many jurisdictions.
- Large remodels or construction projects (Live in Flip) can be self-managed, worked on directly, and the value add, after 2 years, is largely tax free up to certain limits.
- Many areas around the country allow for ADU Construction - house-hackers enjoy similar benefits to remodeling projects by being naturally on-site for ADU construction.
Putting it all together:
If I were starting over and looking for a house-hack in Denver, CO today, I'd be looking for a 4 bed / 3 bath property in the $500K - $600K range in an up and coming area (like Aurora near the medical campus). I'd be looking for a property with an assumable mortgage on AssumableLoanFinder.com (Screenshot below of live deals available today for a house-hacker). I'd underwrite the property, with that low interest rate assumable mortgage, to cash flow positively from day 1 as a long-term rental, but be willing and able to use the rent by the room strategy or to rent out part of the property as a Short Term Rental to dramatically increase cash flow during my occupancy.
The ideal property would meet the above criteria, AND would have a large yard, or ideally, a detached garage that was a suitable candidate for an ADU construction project (CO now allows ADU construction on most properties), and/or a primary structure that had lots of value-add potential.
This might give a one-time (non-scalable) boost to cash flow, offer multiple value-add options, and allow the house-hacker peace of mind, via the assumed mortgage, in long-term breakeven or positive cash flow in the event that the value-add plans end up not being executed, and/or the person has to move out, and rent by the room or STR become unavailable for some reason at a future date.
