When Joe Christiano’s sister chose to move in with her boyfriend, he wanted to assist her. Living in the Bay Area, where housing prices are extremely high, their search for homes brought them to properties around $800,000, often with serious structural issues.

The lengthy house hunt took a turn when Christiano reconnected with an old high school friend. “He informed me about a workshop for co-buying,” Christiano said, thinking it might be a solution they could explore together.

This friend, Niles Lichtenstein, started a company named Nestment. Nestment aims to assist those priced out of the housing market by presenting innovative ways to achieve homeownership. They provide essential tools such as legal agreements and financing options to make joint purchasing manageable.

Many of Nestment’s clients opt for a multifamily property, living in one unit while renting out the other, or they engage in “co-buying” with family or friends, sharing the expenses of the property.

Eventually, Christiano’s family found a duplex with long-term tenants. His sister and her partner reside upstairs, sharing the mortgage costs with Christiano and his spouse.

“While owning a rental property isn’t for everyone, I’ve found it to be an interesting way to generate generational wealth,” said Christiano.

Lichtenstein explained that his inspiration for Nestment came from his mother, a widowed immigrant who provided boarding to international students to manage her expenses. As housing affordability continues to decline for many Americans, experts suggest revisiting these age-old “house hacking” methods.

Considering rental income, financing a multifamily property like a duplex or triplex is often less expensive than a single-family home, Lichtenstein told YSL News.

“Plus, your mortgage, property taxes, and other costs are significantly supported by the rental income,” he noted. “This makes the journey to homeownership more sustainable. For those struggling to afford a single-family home, this is the best alternative.”

Fostering ownership

It’s not only startups in Silicon Valley that recognize the importance of house hacking. Across the nation, nearly 800 down payment assistance programs, primarily sponsored by local governments, are available to facilitate multifamily home purchases.

<p“Encouraging homeownership, especially among new buyers, is a priority for them,” said Sean Moss, the executive vice president of product and operations at Down Payment Resource, based in Atlanta, which monitors such programs.

Moss explained that the price of a duplex isn’t simply double that of a single-family home, and similarly, triplexes don’t cost triple. “This can be a significant advantage for prospective purchasers.”

At Neighborhood Housing Services of New Britain, a housing counseling nonprofit in Connecticut, many clients initially aim to buy a single-family home but often shift their focus upon realizing their budget constraints, said Maria Calkins, the organization’s home services director. “When they see it’s challenging with their financial approval, they often say, let me explore landlord training and find out more.”

Furthermore, some buyers may not find any single-family homes to purchase, according to Moss. In such a competitive market, broadening their search is a smart strategy.

Tenants and toilets

While assisting people in achieving any type of homeownership is worthwhile, it is also crucial to encourage the right individuals to become landlords, according to Moss. Therefore, most down payment assistance programs typically require participants to complete some form of “landlord training.”

Neighborhood Housing Services of New Britain aids buyers in finding financing options and provides support for prospective landlords. This guidance can be crucial in filtering out those less suited to the responsibilities of being a landlord. “Some people realize they’re not ready for this and back out,” Calkins noted.

For many, the COVID-19 pandemic served as a wake-up call, leading to widespread job losses and prompting many government bodies to establish tenant protections that some landlords found overly stringent.

Meanwhile, others may find the day-to-day responsibilities of being a landlord, often referred to as “tenants and toilets,” to be challenging – though Christiano has embraced it. He emphasizes that both he and his sister take their roles as landlords very seriously.

“We’re excited about building a good relationship with our tenants and being active members of the community,” he said.

Cash flow

Working with a company like Nestment or a housing.

Although having a counselor is not essential when purchasing an investment property, Christiano found their assistance valuable in grasping the financial aspects.

A key consideration is whether rental income can be factored into mortgage eligibility, which can differ based on the loan type.

Some mortgage types accept rental income if the property has prior rental history, while others may allow up to 75% of rental income regardless of past rentals. An expert who understands the various loan options can help align a buyer with the ideal mortgage solution.

Additionally, Christiano appreciated the confirmation from Nestment that the property was not suitable as a rental income investment. In places like Berkeley, and many other U.S. cities, properties are often too expensive for rental income to cover the mortgage and additional costs.

In Christiano’s situation, the monthly mortgage payments are approximately $5,000, while the tenants contribute about half that in rent. Furthermore, property taxes add around $1,500 each month, and he is still exploring various property insurance options.

“I can envision scenarios where (his sister and her partner) might reside there for 30 years, and the tenants may stay equally long. We could refinance, increase their rent by $50 a year, and eventually see some cash flow,” he explained. Alternatively, he mentioned the couple might move, prompting him to rent out both units. Regardless of the situation, the property is expected to appreciate in value, and for now, Christiano is enjoying the ownership journey.

“Having a satisfied tenant who pays rent promptly brings me joy. Each time I get the notification from Zelle indicating a payment, I feel great,” he said.