The Ultimate House Hack: How to Acquire 8 Properties in 3-4 Years With Just 3.5% Down
The world of real estate investment is full of opportunities, but it can be challenging for new investors to break in. Whether you are just starting out or you are a seasoned investor looking for new strategies, the house hack we're about to discuss can be a game-changer. This technique can help you acquire up to eight rental properties in as little as three to four years, all while starting with a minimal 3.5% down payment. Let's dig in.
The Game-Changing Strategy
In an exclusive video discussion, I sat down with renovation mortgage specialist Chico Fisher to discuss an incredibly effective strategy for rapidly growing a real estate investment portfolio. The cornerstone of this method is using a renovation mortgage, specifically an FHA 203(k) loan, to buy a quadplex (4-unit property) as your primary residence.
How It Works
Find a Suitable Quadplex: Look for a 4-unit property that requires some renovation.
Qualification: Many people worry that they might not qualify for a more expensive quadplex. However, with this strategy, the rental income from the other three units will help you qualify for the loan.
Down Payment: The FHA 203(k) loan allows for a down payment of just 3.5%. If the property costs $500,000 and you want $100,000 for renovations, you'd put down just 3.5% of the total $600,000 acquisition cost.
Rental Income: After purchasing the property, you live in one of the units and rent out the other three. The rental income from these units goes toward covering your mortgage.
Appraisal: The property is appraised based on its value after renovations (After Repair Value). This often reveals immediate equity in the property, increasing your net worth.
Refinancing: After living in one of the units for at least a year, you can refinance out of the FHA loan into a conventional loan. This sets you up to repeat the process.
The Numbers Game
Suppose each of the three rented units brings in $1,500 per month. That's $4,500 in rental income that you can use to offset your mortgage payment. Moreover, real estate typically appreciates by about 4% per year, so the property's value would likely increase, providing you with even more equity.
The Power of Repetition
After refinancing, you are now free to purchase another quadplex, moving into one unit and renting out the remaining three. This way, within just three to four years, you could end up with 8 rental doors (two quadplexes minus the two units you lived in).
Advantages and Perks
Lower Down Payment: Traditional investment properties often require a down payment of 25%. Here, you're only putting down 3.5%.
Build Equity: Due to the power of leverage and appreciation, your equity builds up faster.
Cash Flow: The strategy provides a steady cash flow through rental income.
Appreciation: Besides cash flow, you also benefit from property appreciation and can raise rents annually.
This house-hacking strategy simplifies the complicated world of real estate investment. It's a practical and smart way to quickly build a robust rental property portfolio. Whether you're a newbie or a veteran in the real estate game, leveraging this approach could significantly accelerate your path to financial freedom.
Connect with Us: Faber Real Estate Team
Whether you're contemplating selling your home or in the market to buy, having an experienced team to guide you can make all the difference. That's where we come in.
The Faber Real Estate Team is dedicated to providing you with top-notch service tailored to your individual needs. Based in Marin County, we have the local expertise and in-depth market knowledge to help you make informed decisions. Our team can offer personalized consultations to help you understand how the current mortgage rate trends may affect your buying or selling plans.
Why Choose Faber Real Estate Team?
- Expert advice on navigating the 'golden handcuff' effect
- Up-to-date market analytics and trends
- Personalized home evaluation
- Customized buying or selling strategies
- Local expertise in Marin County
Don't let the uncertainty of the market hold you back. Reach out to us today for a consultation and let us help you take your next steps with confidence.