Duplex House Hack, Doing Hollywood Right!

[Kenan Heppe]

Investment Info:

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

Purchase price: $1,210,000
Cash invested: $322,000

I purchased a vacant Hollywood duplex for 1.21M, 20% down, at a 3.24% rate. I am 50% owner, as an owner-occupant, and a family member of mine is a 50% owner, non-occupying co-borrower. The main house is a 4+2, and the back cottage is a 1+1, no shared walls. Each residence has its own address. There's a 10'x19' garage (built in 2017, with a certificate of occupancy) that can be converted into an ADU. The deal was that I put 45% of the down payment in, but get 50% equity because I'm PM.

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

I moved back to the U.S. after living in China, which for me meant a lack of job security in the short term. My wife is from Russia, and waiting for her work permit. So, we were only interested in a deal that would allow us to rent out a larger portion of the property than we were using for ourselves, resulting in a much lower monthly cost of living (if the property wasn't in disrepair).

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

Found this with an agent, and negotiated the deal while I was traveling through China and Russia. It was a living nightmare, but we got it done!

How did you finance this deal?

Conventional financing, with a family member as a 50% owner, non-occupying co-borrower.

How did you add value to the deal?

We upgraded the property to match modern standards of renters in the area, and we will later convert the garage into a legal JADU.

What was the outcome?

The final outcome has been fantastic. We have great tenants who are very respectful. On their birthdays, I give them gift cards and periodic treats for their dogs. My wife and I are enjoying Hollywood without the terror of a huge monthly payment, while I re-organize my life and transition all of my work from Asia back into the States again.

Lessons learned? Challenges?

We used a property management company to lease the front unit. They didn't look deeply into the applicants. I.E.: They signed off on a man who was lying about his cash reserves. Only because I myself spotted an error in his bank statements (Battle Ground, WA spelled Battle Groung, WA) did we realize he was lying (confirmed by Wells Fargo). They initially didn't want me seeing the lease that tenants were signing, either. Imagine that! Once I saw it, it had many errors. Check EVERYTHING yourself!