2020 The Year of my Crazy Luxury House Hack

[Chris Stephens]

Investment Info:

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

Purchase price: $1,600,000
Cash invested: $550,000

My personal residence. I rent the basement and the DADU in the back for a combined cf of $3750, reducing my monthly costs (PITI + Utilities) from $5800 to $2100.

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

Increased standard of living, solid appreciation, and low monthly cost. I live on the top of Queen Anne in a wonderful home for less than the cost of an in-city studio apartment.

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

I rode my bicycle throughout Queen Anne looking for opportunities. This home was originally listed for 1.85 and I waited until they started to drop the price. Before accepting my offer of $1.6M, the listing agent wanted to walk through my home to ensure that it was desirable and ready to list. They gave me one week to list my home, 20 days to drop the financing contingency, and 45 days to close.

How did you finance this deal?

Conventional, using proceeds from the sale of my current home at the time.

How did you add value to the deal?

I am still adding value. Removed the colonial landscaping in favor of Pacific Northwest Native garden, converted the basement into a rental, and will remodel the top floor in a few years before either selling or renting the entire property as a triplex.

What was the outcome?

Due to covid restrictions, I moved my family to our family cabin in Leavenworth, WA to make it easier for agents to book viewings and comply with covid restrictions. I commuted from Seattle to Leavenworth and back several times per week for work (3 hours per day). I would up dropping all contingencies on the new home before actually securing financing and nearly lost my 30k deposit. I closed my current home and funded my future home within 48 hours of the closing deadline.

Lessons learned? Challenges?

Fight for what you want and be willing to do the mental calisthenics needed to keep a deal alive. I explored every possible option, and had to account for both COVID restrictions and the impact protests were having on the market. At one point, the selling agent relisted the property because she didn't believe that I could pull it off. We wound up going head to head with their agent and their managing broker to get them to honor the terms.

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

Yes. PM me if you are interested in contacts.