House Hacking - How to Become a Real Estate Investor

Accumulating real estate every two years with low down payments by buying multi-unit properties and living in them, often referred to as "house hacking," is a popular strategy. Here's a breakdown of how it works and key considerations:

Core Strategy: House Hacking

Multi-Unit Properties:
The strategy revolves around purchasing duplexes, triplexes, or fourplexes.
You live in one unit and rent out the others.
Low Down Payment:
Owner-occupied multi-unit properties often qualify for lower down payment options compared to investment-only properties.
FHA loans, for example, allow for down payments as low as 3.5%.
VA loans (for eligible veterans) can offer zero down payment.
Rental Income:
The rental income generated from the other units helps offset your mortgage, property taxes, insurance, and other expenses.
In some cases, the rental income can cover the majority or even all of your housing costs.
Building Equity:
As you pay down your mortgage and the property appreciates, you build equity.
Key Steps and Considerations:

Financial Preparedness:
Credit Score: A good credit score is crucial for securing favorable loan terms.
Debt-to-Income Ratio (DTI): Lenders will assess your DTI to determine your ability to repay the loan.
Emergency Fund: Have an emergency fund to cover unexpected expenses, such as repairs or vacancies.
Loan Options:
FHA Loans: Popular for low down payments, but have specific requirements.
Conventional Loans: May require a higher down payment but can offer more flexibility.
VA Loans: Excellent option for eligible veterans.
Property Selection:
Location: Choose a location with strong rental demand.
Property Condition: Consider the cost of potential repairs and renovations.
Cash Flow: Analyze the potential rental income and expenses to ensure positive cash flow.
Property Management:
Decide whether you'll manage the property yourself or hire a property manager.
Being a landlord requires time and effort.
Repeating the Process:
Every two years, you can potentially repeat the process by:
Moving into a new multi-unit property.
Renting out your previous unit.
This allows you to build a portfolio of income-generating properties.
Important financial strategies:
BRRRR Method: (Buy, Renovate, Rent, Refinance, Repeat) this method can be a great way to pull equity out of properties, and then use that equity to purchase the next property.
Seller financing: In some cases, the seller of the property may be willing to finance the purchase. This can reduce the amount of money you need for a down payment.