4 year live-in house-hack flip

[Andrew Wilkins]

4 years ago my wife and I bought a 4/3 SFH. We bought it because it was actually cheaper to have a mortgage than to pay rent in the city we live in. We had zero idea what we were doing but we knew we had a good deal. The property was in nice little pocket neighborhood in a C- area of the city. However, A light rail was planned to extend down a main street within walking distance and the house seemed to be in the path of progress. Today, the area is gentrifying bit by bit and the light rail is currently under construction. New construction is coming up all around us.

Since we had no idea how to do anything with real estate, we bought from Open Door, used their agents, their lender (this is actually what got us the house because we only offered asking price, again, no idea what we were doing). So many things could have gone wrong and we could have been taken advantage of, but it worked out. At the time houses similar to the one we bought in better area's were going for 250k, the one we bought was on sale for 185k. 

Fast forward a year into owning the house, we discovered Bigger Pockets and decided to get our financial life in order. We learned about house-hacking so we got a few roommates. OH THE LESSONS LEARNED!! We've had 3 god awful tenants in 3 years and the biggest one is "It doesn't matter if the person is your best friend in the world, they must sign a lease just like anyone else." We charged our tenants 500 a month, utilities included and typically at any given time had two tenants which covered the majority of the mortgage. We were able to save and pay down a massive amount of debt because of it. 

Now for the flip. with everything that is going on, our house has basically doubled in value and we are planning on cashing in. My wife's mother owns a single rental that she is selling to us at a loss to avoid cap gains and depreciation recapture. So we will get a new home to move into on the super cheap and we can sell our house at what feels like the top of the market. We have a 3 month renovation period we are working in. We are upgrading all the counters to granite, painting cabinets, carpet to LVP, hardware from a basic brass to a matte black with copper finish, putting in ceiling fans etc. We plan to list in December, Here's a break down of the numbers of this deal

Purchase price: 181k (got 4k credits on close due to repairs), 5.1% rate, $1,160 PITI, 10k Down OPM (Whole life insurance loan + gift of 5k from family)

Mortgage owed: 165k ( Spent the last 15 months taking advantage of the CARES Forbearance) 
Renovations: 15k 

Listing price: 400k (hoping to get 425K)

Comps: 350k-380k

New house:

Purchase price: 80k cash (worth 240k)

Comps: 240k

The plan is to put a Heloc on the new house but have it paid off to reduce our living expenses. One tenant will be moving in with us so the house will cashflow and act as our reserve. We will take the rest of the cash to BRRRR multi-family properties and hopefully do a minimum of 4 deals in 2022