House Hacking a Fourplex

[Jeremy Bourgeois]

Hello everyone,

Over the past few months, myself and my business partner/friend @Bruno Maluf have been working through some of the processes of our first house hack. I think this particular deal is very unique in the way that we have made it work. Also as a disclosure, I am not providing advice for people who would like to do the same in the future, as we have not yet had the experience to provide such good advice. I am merely sharing some perspective and shedding some light on one of the many ways you can structure a deal and set a plan.

So, to give some backstory; Myself and Bruno have been best friends for about 15 years now. This past year I was away on the other side of the country in the military while Bruno was back home. We both wanted to make our money work for us and invest in real estate as soon as possible. And we both agreed that house hacking was the best way to start. As we were educating ourselves and building wealth to invest with, (which for my part did take a year. I would recommend taking time to educate yourself and building some form of capital before you jump in) Bruno was actively searching for the right deal to house hack. A few months ago, he had found a great off market deal through our friend and realtor @Marco Epifani, but wasn't able to get the financing for it. And that's where the partnership was born. The reason I was okay with this while being on the other side of the country and not actually seeing the property for myself in person was because I have a lot of trust and faith in my friend to do his due diligence. Once again, I am not recommending this approach, but in this case it was a win-win for the both of us. He gets a great deal without as much money out of pocket, I get a great deal and have a property ready for investing as soon as I moved across the country. And we both get to learn a lot about the business together. Everything is shared 50-50 between the both of us.

So, here's a quick breakdown of the numbers on the property:

Description: Fourplex located in a central up and coming area of town. 10 beds total, 4 full baths total. Excellent tenants inherited who take good care of the property. Nothing major on the inspection report; a few thousand dollars to fix minor repairs and keep the property in great shape. Updated interior and exterior.

Appraised value: 245k on the second appraisal (the first appraisal was at 214k, since the appraiser was covering her tracks for a previous low appraisal on the same property some years back) This appraisal is still low, since there are no good comparable properties in the area. I would say it's more like 275k-300k.

Purchase price: 252k

Down payment with closing costs: 22k (5% down conventional loan)

Monthly PITI: $1,900 ($1,700 once 20% is paid down and PMI drops off)

Monthly utilities: $300

Monthly CapEx/Repairs allowance: $400

Monthly rent while house hacking: $2,400

Monthly rent after house hacking: $3,100

Monthly rent after rents are brought to market value: $4,000

We should be closing on the property in just over a week! Then it's on to finding the next deal while actively managing the first rental. More than anything else, both of us are excited to get into the business so we can learn the ins and outs and scale our capital.