Everyone seems to agree that the idea of House Hacking (buying a 2-4 unit property with a low downpayment loan, staying there for a couple of years, then renting it out fully, and then doing it again potentially) is a PHENOMENAL strategy to build wealth with less money out of pocket.
The issue is, how do you do that now with so few quality Multifamily properties on the market, and the best ones going way above ask? The answer is… You don’t.
Read on…
Using a Single Family Home to House Hack – Here’s how:
- Identify your budget & loan type. If it were me, I’d stick to under $250,000 and use 5% down conventional loan or 3.5% down FHA, depending on your credit score.
- Source move-in properties with 4 bedrooms or more, in areas in the line of development. I’m personally a fan of this strategy on the Near Eastside where you can find very affordable, turnkey housing, only 10 mins or less from downtown. Use an investor-friendly agent for this.
- Run the numbers. I’d be using between $500-750 per room as the rental income. There are a plethora of mortgage calculators to help you figure out the monthly payment. I like this one. For reference, a $250,000 home with 5% down is around $1,800 monthly payment. This means that with 3 roommates you can be cash flow positive or neutral.
- Unique Strategies. Some people don’t want to share a unit with roommates. I get it. Why not have your investor-friendly agent help source properties with “carriage houses”, basements that can be their own unit, or same with an upstairs unit. Or maybe find one with a garage that can be converted into a unit. Adding some drywall and a doorway can be done in under $10,000 and transform the rental functionality of a property. Also, there are many construction loans to help roll the costs into your loan. Ask me about it.
- Execute! The biggest reason I notice people re-up on their rental lease and continue renting is because one of a few reasons. Often, they haven’t been educated on their options. Frequently, they get “analysis paralysis” and want to continually find a better deal, a better loan, or a better rate. Some are just too comfortable… Renting is easy. We know HOMEOWNERSHIP requires sacrifice and hard work. If you want to build wealth through real estate this is a pre-requisite.
Here’s the perfect type of home for this strategy. This one is a good candidate for some kitchen updates and exterior paint to boost the value, too.
Example deal analysis:
1030 Jefferson Ave
4 bedrooms, 2 baths
Price: $209,000
Mortgage PITI: $1,580
Room rental potential: $600 per room x 3 = $1,800
$200 per month for repairs / maintenance
= Living for free while building equity
NEXT STEP:
If you want to get started then I would suggest booking a “house hack” consultation with me. To do so, just email me tyler@tylerlingle.com!
