First Investment, Duplex Househack

[Joe Stout]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Catonsville.

Purchase price: $270,000
Cash invested: $10,020

Duplex in downtown Catonsville built in 1899. 1 unit with full kitchen and full bathroom and 3 bedrooms upstairs. 1 unit with 2 bedrooms, laundry room, living room, full kitchen and full bathroom downstairs. 10,000 sq. feet of land, fenced in backyard. Unfinished basement with concrete floors and washer and dryer unit. Used Consultant to help moderate negotiations and expedite the paperwork and structure the deal. Renting the bedrooms out in the first unit and the unit upstairs as a whole.

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

It was local and I knew it was in a great market with more and more population growth. I was watching my town improve little by little and this gave me the confidence to go ahead and make my first move. Also, it was a perfect place to be right in downtown, I even thought somewhere down the line I could turn it into an Airbnb!

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

Found this deal from my Mom sharing one of her Facebook friends posts with me. I sent her friend a message with an offer and had no idea what I was doing, but I let them know I was serious. I contacted her week after week checking in to see if they wanted to sell their house to me. We negotiated in person twice. They had multiple offers, I tried to hold my ground in a strong sellers market and was semi-unsuccessful, but they had offers for $20,000 more! I ended up getting the property for 261500

How did you finance this deal?

Off Market Deal with friends parents. Kept most money possible in my pocket by pushing the purchase price up to $270,000 from $261,500 and getting a seller concession of $8,500. Utilized FHA financing to put little money down (3.5%) and qualified for FHLB intake grant ($7500). Closed on the house for $887 instead of original $22,000.

How did you add value to the deal?

Added French doors and a bedroom door to what was an office to create a bedroom for myself. Added a vent in the bathroom. Repointed the chimney and some structural supporting beams in the basement. Treated for pests in the unfinished basement. Added new post on the balcony in the back and repainted the door that leads to the balcony. New ovens in both units. Updated the door knobs and door hinges in upstairs unit. Added AC units to both units. Updated fire alarms -

What was the outcome?

Was able to house hack for a year successfully, gained a lot of experience in being a landlord, managing tenants, writing clear leases, living with a roommate, learned how to strike deals with the doctor across the street when desperate to find parking for my tenants and I.

Lessons learned? Challenges?

Lessons learned- take tenant screening seriously, it's not always a rush to find someone. When renting to friends/people you have a great rapport with they expect lots of breaks and deals, but that's life. Challenging confronting tenants to ask for payment, however it's necessary and the nerves will go away. Challenging letting in handymen and pest control, etc. Whoever needs to be at the house for repairs, make sure tenants are responsible for being there when service people arrive.

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

Martin Willigan is a extremely knowledgeable agent in the Catonsville Maryland area. His negotiation savvy saved the deal and was able to calm both parties when negotiations were heated. Extremely smooth in processing, walked the house with me, let me know what the house should go for and many tips regarding the unfinished basement that I otherwise wouldn't have known. Gave me access to his rolodex and I was able to fix my property up using his contacts. Take advantage of his talent!