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House Hacking a Duplex, Triplex, Fourplex

build-to-rent podcast market research Aug 26, 2021

Owner-Occupying a Fourplex (House Hacking)

You take that option off the table when you go five units and up unless that person wants to get commercial financing or something. But that's what's unique about a fourplex.

What about fourplexes and how they merge with owner occupancy? Where do the two worlds come together?

Chase Leavitt
So a fourplex or four units are nice because you can still take advantage of the 30-year fixed conventional loan. That's what most homeowners are used to is that 30-year fixed. It gives you a more favorable interest rate.

Steve Olson
Because you live in it, the interest rate you're going to get is lower than if you didn't live in it?

Chase Leavitt
Not necessarily, it's whether you live in it or not. With four units or four doors, or lower. When you when we start talking to the five units or more, the bigger apartment complexes, your financing is going to change.

Sherida Zenger
You have to go commercial at that point. Doing the four doors or less or being able to go residential, Fannie or Freddie.

Steve Olson
No investor left behind. What is that? What does that mean?

Sherida Zenger
Those are the different loan types/programs that you are allowed through your lender. Lower interest rates than something that's on commercial. It's more of a conventional loan, like Chase was saying, you're going to do a 30 year fixed on something like that. Which makes it I think, more affordable for some people.

Steve Olson
The true 30-year fixed, that loan could be given to an investor, that's not going to live in the four Plex or the triplex or the duplex or the home, right, one to four units. What if that investor wants to live in one of the units has that changed up?

Sherida Zenger
It does change it up, but it has to be a duplex. And at that point, they can do 20% down? If it's anything over most lenders are going to require 25%.

Steve Olson
A lot of people talk about this house-hacking concept. They don't want to get commercial financing or they don't or they want to put less money down so they think if they go buy this duplex and move into one side I can put a very small amount of money down move in and live there for X amount of time and then move out and just keep the loan. Which is a really really great loan--low downpayment and the lowest possible interest rates.

Some people I think get into trouble with that. That's called loan fraud. If you say I'm gonna move into it and you never do. Not the most sustainable business model, although it doesn't stop some people from trying.

Chase Leavitt
Okay, and I like the house hack idea. But why not house hack multifamily? A fourplex, duplex, or triplex? That's a great idea.

Steve Olson
Absolutely. It works well, and they're out there. I mean, for whatever reason, people builders put up a ton of fourplex is in like the 70s in the 80s. And then they stopped for about 20 years.

Sherida Zenger
I'd be interested to figure out why they did that. What was the reasoning behind that? Did people want more land and so they wanted that's where they went single-family or what was the thought behind that?

Steve Olson
Every city I've gone to, every market I've ever analyzed, they all have these little pocketed neighborhoods. You can tell this was built in the 70s and 80s, those boxy-looking style for plexes or garden-style apartments. They just built him like crazy and then they stopped.

Know what to check into it.

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