All Forum Posts by: Yiyi Guo

@Yiyi Guo, I would definitely recommend house hacking a 2-4 unit property, preferably 4 units due to the better cash flow.  It knocks the socks off of renting.  :)

Your primary/primary residence is the home you live in. You don't need as large of a down payment on a primary residence (lenders see it as less risk--you are less likely to stop paying on the house you live in vs. a rental property that you own but don't live in). You can buy a primary with 5% down, or 3.5% down with FHA, or even 0% down through VA/veteran's loans or rural development loans. Now if you are buying an investment property, lenders will typically want 20-25% down and sometimes cash reserves in savings in addition to that. So for example, if you were to buy an investment property, say a duplex, for 300K every year, you'd need $60,000 for a down payment, plus closing costs--say $70,000. If you did that every year for five years, you'd own 10 units in 5 duplexes. But you would need $350,000 to do that. If you bought the same duplexes as owner-occupied and moved into them, you'd only need $15,000-20,000 (5% down on 300K plus closing costs), so you'd get the same properties for $100,000. Moving every year for five years is a pain in the neck, but you'd have a really nice portfolio of properties at that point and could sit back and enjoy the benefits. You'd have to buy smart, of course, and make sure they have good cash flow and allow for capital expenditures. But I'm saying this is something that is much more do-able while you are younger and have less stuff, no kids and schools and kid friends to worry about disrupting, or need more space than a typical duplex will allow.

Also, though someone mentioned that you can get cash back out with a refinance, you have to be careful. That will only be true after some time when a property appreciates in value--IF it appreciates--which might be never, depending on the economy or the area you buy in. Or if you buy a distressed property at a deep discount and improve it, you can sometimes refi after 6-12 months if you search for a lender, but you'll only be able to get 75%-80% of the value back out, so beware. And sometimes the appraisals of the property's value come back low, so there is no chance of getting any cash out at all. 

I would go for it. I wish we had been more aggressive in purchasing properties when we were younger, especially before we had kids. If I could go back, I would buy a new primary residence every year for as long as I could stand to do it. If you pick good properties that cash flow and get in with a really low down payment because it's your primary, you could buy new duplex every year for five years, and set yourself up beautifully for the long-term. Don't worry about moving to a new area. You can always get a property manager or do a 1031 exchange into a better property in your new location.

@Yiyi Guo welcome to the forums from a Milwaukee investor!

You don't know what the future will hold.  You may choose to move after a year or two instead of 5.  Or, you may stay 10.  If there are options to begin something you want to do, what are the negatives to just doing it?  It sounds like you have exit strategies mapped out either way.

If house-hacking, just rent out the property after you leave. Also, you can use equity towards future purchases. 

I think you're really overthinking this. It's much simpler than you're making it sound. 

Good luck!