How can you use the method known as house hacking to purchase a million-dollar home? San Diego realtor Kyle Whissel shares the method of house hacking and how as a buyer you can use this method to help you qualify to afford more homes.
How to Buy a Million Dollar Home
How can you buy a $1,000,000 home in San Diego, even though you can only afford half a million? Hey, it's Kyle with the Whissel Realty Group here at exp Realty in San Diego. And today I want to share a little fun fact called house hacking. This is actually how I got personally into the real estate game. And I want to share a little bit about house hacking with you.
Maybe you've heard of house hacking, maybe you haven't, but here's the basic premise of it. Is it allow you to buy more home than you can traditionally afford. Most of the time you talk to a real estate agent, you talk to a lender, you sit down, you meet with them. They look at your finances and they'll say, all right Mr. Whissel, you can afford a $500,000 home. And you're like, sweet. I can afford 500. Then you start looking at what's available for 500,000. You're like, well, I don't really like any of this stuff for 500,000.
I'm like this sucks. I guess I'll just rent for the rest of my life. And you just watch your rent go up, and up, and up, and up every year. You're like, dang it, this is so stupid. And you know every time you make that rent payment, that your landlord is taking that rent money and using it to pay their mortgage. And you keep thinking of yourself well dang it, what if I could be the landlord?
Well, this is where house hacking comes into play. And the way that this works and the way I bought my first property, I bought a three-unit property, which is typically known as a triplex. And just for clarity, if it's one building with three units, it would be called a triplex, and if it's one property with three detached units, we would often call that at three on one, either way, a three-unit property.
It's one single property with three units on it. If they're attached, it's a triplex, if they're detached, it's called the three on one. I bought this triplex property. This one is kind of unique. I had six bedrooms on the downstairs, so six bedrooms, five bathrooms on the downstairs portion, and upstairs, I had two, one-bedroom, one-bath units. Three completely separate units, their own kitchens, and all of that stuff. And so what was really cool is I lived in one of the bedrooms of this six-bedroom house, rented out the other five bedrooms. Then I also rented out the two apartments on top. I was bringing in rent from seven people. I was bringing in so much rent that I actually brought in $1,000 more in rent every month than what the mortgage was. How cool is that?
Now I got to buy this property for half a million dollars and make $1,000 a month. That's pretty freaking cool, right? Well, that's how I got started. I want you to do the same thing. Now that was years ago, prices are a little bit higher today. That same half a million-dollar property today is now worth about $1,000,000. How cool is that? Right? I bought this thing 10 years ago and it's now worth double what I paid for it. So that house that I was making $1,000 a month on, and now I'm actually making more than $1,000 a month on it, is now also worth half a million dollars more than I paid for it. That is what house hacking is all about. Here's how this works. You meet with your lender, your lender says, Hey, Mr. Whissel, you can afford a half a million-dollar house. You don't find anything you like. Okay, well, that's where the game stops, with most lenders, with most real estate agents.
But with our team here, at Whissel Realty Group, it's going to go a little bit further cause now let's talk about how do we house hack? How can we actually help you get into something for more than 500, even though that's all that you qualify for? And that's where we start looking at multi-unit properties. The beautiful thing here in San Diego County is that there are multi-unit properties everywhere. Whether you're down in South Bay, North County, East County, central San Diego, there are multi-unit properties all over the place. And here's what's really cool. I recently saw a deal. There was a $1,000,000 property. It had three units in that property. They were all two-bedroom units.
And these two-bedroom units each rented out for $2,500 a month. So here's how this works. You live in one of the units, then you rent out the other two units. Well, those other units bring in $2,500 per month each. That means those other units are bringing in about $5,000 in rent. Pretty cool. Now here's how the lender is going to look at it. They're going to take whatever that rental amount is, and they're going to take about 75% of what that is, for argument's sake, let's just say it's four grand that's leftover. Now they're going to give you $4,000 a month in income to help you qualify for a larger property.
Well, when you take $4,000 a month in income, that's going to allow you to buy roughly another six to $700,000 above what you would have qualified for before. Where before you only qualify for 500, now you bring in the rental income from these other two units, now you're qualifying for that $1,000,000 house easily. In fact, your mortgage payment, by living in the one, renting out the other two, your mortgage payment is actually going to be less in that scenario than if you just went and bought a $500,000 property directly. Now here's what's so cool is where before you couldn't even find something you would live in, now you found something you're living in and you're bringing in rental income from the other two units, your monthly expenses lower, but now instead of having a half a million-dollar property you hate, you got a $1,000,000 property you love. And now when you see the values increase, your value of a million is increasing at what I predict to be somewhere in the neighborhood of 6 to 8% over the next year.
Well, what do you want to hold when that scenario? Do you want to hold a half-million-dollar property or a $1,000,000 property, right? We all want to own the $1,000,000 property. And here's what's cool, you could do this with three and a half percent down, or if you are in the military, you could do this with the $0 down. How cool is that? That you could go from no money down and qualifying for half a million to buying a million-plus dollar property with no money out of pocket. That is what house hacking is all about. If you'd love to sit down and learn more about house hacking, see if that's an opportunity for you, give us a call at the number down below. I'm Kyle Whissel with Whissel Realty Group. Thanks for watching.
