How I bought a cash flowing *single family* house-hack at 23

[Sara Frank]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $250,000
Cash invested: $12,000

Bought this property using an FHA 203k loan. Using a combination of seller credits and FHA financing I was able to bring only $12,000 of my own money to closing on a 325k loan.

What made you interested in investing in this type of deal?

I wanted to reduce my living expenses as much as possible and also bring as little money as possible to close (as one does when they are in their early 20's!)

How did you find this deal and how did you negotiate it?

I found this deal on the MLS via my agent. We negotiated the purchase price in exchange for a full 6% subsidy from the seller to cover closing costs.

How did you finance this deal?

Using an FHA 203k renovation loan.

How did you add value to the deal?

At the time of purchase it was a 2 bed, 1.5 bath row-home. I put about 70k into renovating it, adding two bathrooms and creating a studio apartment in the basement to rent on airbnb. After renovation it is a 3 bed 3 bath home. ARV is currently sitting in the high 300's. Phase II of the reno will be this summer when I add a roof deck and finish out the kitchen. ARV after phase II

What was the outcome?

PITI (including PMI) is $2200, utilities are $300 for a total monthly cost of $2500. I rent the basement on airbnb for around $1700-2200/month and rent the second bedroom upstairs for $700/month so my total out of pocket cost to live there is. between $0-300/month. I plan to refinance at the end of the summer to remove the PMI.

Lessons learned? Challenges?

This house was in decent condition when I bought it and in a great neighborhood. To unlock the full power of the 203k I would have found a crappier house. I think at the time I was nervous about doing a total gut rehab but now that I have this deal under my belt I would go for a nastier place so I can add maximum value and then pull my money back out at refi.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Chris Loughlin at First Home Mortgage was a great resource to me throughout the whole process. I also used Bill Evans as my 203k consultant and would recommend him.