All Forum Posts by: Parteek G.

@Parteek G..... sort of.  Not traditional, but pretty close.

Before the word "hack" became trendy and overused by millennials to describe everything from lowering the cost of housing to making your own kombucha at home, basically we just called this 'frugal living' or 'having a roommate'.  Frugal doesn't mean cheap: it means not paying more than you need to.  In this case, you're getting ownership of a nice home and your parents' contribution will help you pay less than you'd pay on your own.  So yes, consider your housing needs/desires "hacked".

Absolutely need to have a written lease with expectations.  You and your parents may get along great today, but if they had to move out and/or stop paying you rent for any reason whatsoever, would that turn your 'hack' in to a nightmare?  What would be the expectation?  Would you require them to move out?  Would you lower the rent?  Would you let them stay for free?  What if one of them has to move into assisted living and there's no enough money left to pay you the full rent, but you can't move anyone else in because one of them is still living there?   What if one of them develops dementia?  What if one of them dies and the surviving parent wants to remarry/have a BF/GF over and you don't like the new romantic interest but they cannot afford to get their own place?

Spell it all out up front.  That is not being nit-picky or skeptical of their willingness or ability to honor the deal: that is showing you care enough to take care of potentially troubling issues before they occur.

Any siblings?  If yes, are they aware of this deal?  I only ask because if they aren't, down the road when it's time to settle the estate there could be misinterpretations among parties that either you or mom 'n pop were doing each other favors under the table and that could lead to squabbles.  A professionally drafted Last Will & Testament would be advisable, as well as a Durable Financial Power of Attorney in case their estate would ever end up owing you rent money.

Hi @Parteek G. I would have them sign a lease with you if they are okay with that which shows the rent amount and then set up another bank account to keep track of your income and expenses. This will help prove to the lender a year down the road from now that you do have rental income to offset living expenses to help you qualify for your next investment property once you have the funds or other means to pay for it. 

Just curious, what is our long term plan for the house? 

Your lender will require extensive financial proof and history before approving you for financing. This includes account balances as well as tax returns and pay stubs. 

Although your thinking is correct “I will be making this much more  monthly” and “my net expense is not very much,” lenders won’t take your word for as it’s speculation.

I would recommend seeing what kind of pre-approval you can get for traditional financing and working from there. You do not need to have a house in mind to get a pre-approval. 

It is a house hack in my eyes. And also aren't you buying your first rental property on this purchase?

I mean...good first step. Living cheaper than average rent costs, debt pay down, rent out your unit after a year or 2 and get more income...helping your parents!

Right path dude. Keep it going. How'd you find this place what's the story?

I would much rather buy with hard/private money and then refi than put 20% down.  Would be extremely hard to rapidly build a portfolio having to put 20% down on everything.  Yes, you'll pay a little extra for refi fees and such, but that is much smaller concern than all that dead capital out on the street.  If I had 100K cash, I would much rather buy 12-15 houses than only 4-5 by putting 20% down.  Thats how you build a portfolio, not nitpicking an interest rate that you're not even paying (tenant is paying it).  I'll gladly take a little higher rate for no cash out of pocket.  I refi my rentals around 6% for 30yr fixed, but I have ZERO out of pocket 95% of the time.