House-Hack BRRRR Live-in-Flip

[William M.]

Six months ago, I made a great decision to do a House-Hack BRRRR Live-in-Flip! Listening to the BiggerPockets Podcast, as we all have been known to do from time to time, I kept hearing that buying your second property was a hurdle to overcome as quickly as possible! Also having heard some about a "BRRRR" I wanted to utilize a similar strategy to overcome the "second house hurdle" (SHH – trying to make that an acronym, I'm not trying to Shush you). With my income capped at the time, I knew that I needed to utilize a low or no-money down loan to make it happen. Being a service member, I could use the VA loan (like I did on my first property), but I have other plans for my VA eligibility … (will explain this cliff hanger in a future post). That pointed me to the FHA 3.5% loan as my primary option! Something else I learned from BiggerPockets, during one of my nine-hour treks across Texas, was about a loan that covers the purchase of a property as well as the cost of the estimate rehab, the FHA 203(K). For this to work for me as a BRRRR, the property and rehab costs need to be 70% of the ARV, to get away with spending only the 3.5% down payment (i.e. FHA 203(K) Loan = $70K, post Rehab house appraises for $100K, conventional refinance 70% of appraised value).

Yes I know that with the right deal, you can recoup all funds from the project, but this was something that I wanted to do as quickly as possible, so I lowered my expectations to get over my SHH (remember what that stand for??). I knew that my first house would make much more dinero on Airbnb without me living in it and I wanted to be nearby to continue cleaning on my own and monitor the guest’s usage. That story is a whole other post on its own (here: https://www.biggerpockets.com/forums/530/topics/715486-airbnb-income-calculation-spreadsheet?highlight_post=4219176&page=1#p4219176).

However, in my search, I was road blocked by the fact that many FHA 203(K) eligible houses fitting the right requirements, are banked owned foreclosures and not on the MLS…They wanted the money in one bag of unmarked bills. So, I gave up and started playing RuneScape.

NOT! I adjusted my search to find a house that needed fixing up that also supplied an acceptable living space.

Bam! Welcome to my House-Hack BRRRR Live-in-Flip!!!

Enter the 3 bed 1.5 bath for $120K with the garage and giant backyard! I utilized the FHA Loan (non-203(K) version) and was all in at $5,220 for my down payment and closing costs. I'm living in it now with a couple of roommates and have the kitchen DIY remodeled and a compartmentalized wall removed for under $2000. Expected ARV is $130K, and the roommates are going to rent it for $1200/mo once I move out in December. I will hold off on refinancing until my renters pay the mortgage down to $90K (or I pull the trigger on making the garage a fourth bedroom and bathroom). Currently my Airbnb is grossing $2000/mo on average, and my roommate is paying me $800/mo allowing me to easily save $3000/mo the last 6 months of my Air Force career.

Making this move allowed me to make more money at my Airbnb, save at a more aggressive rate, and buy a ring! (…which was also appraised for $7K more than what I bought it for) so I’m feeling pretty good! 

Hope you enjoyed this as much as I have! Now go do something!