House Hack #2 2020!

[Ryan Thomson]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $319,000
Cash invested: $15,900

This deal almost took me to FI. It was a terrifying to buy with COVID still very fresh, but I figured if I could cash flow I would be fine with any of the scary things that might have happened to the economy with shutdowns, etc.
This home had three bedrooms, a second family room, and a two-car garage. I converted the second family room into a bedroom by adding a closet ($1,000). And I converted the two-car garage into a separate 400 sq ft studio kitchenette ($25,000). I funded this from three different $10,000 personal loans. I now had 5 rooms. I rented three rooms for $600 and the studio for $1,000. For a total rent of $2,800. And once again I lived for free (saving me at least $600 in rent). In the second year I rented out 4 bedrooms at $600 each and the studio for $1500. For a total of $3900. Don't forget about House Hack number one though. When I moved out of that one I rented the bedroom for $650.

Now that studio rents for $1500/month and each bedroom for $650.

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

I love the ROI of a house hack since you only have to put 5% down.

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

This was during COVID and many buyers were scared and waiting to see what happened as lockdowns had just gone into effect. I actually saw this house I was riding my bike to mountain bike. The owner happened to be outside and I talked to him for a little while. We went 10k over asking and then asked them to cover the closing costs and a 3.5k check to the electrician of my choice for an electrical panel upgrade.

How did you finance this deal?

I used a conventional loan. For the garage conversion I borrowed 10k from three different friends and family members. I negotiated a different interest rate with each one. We set up an official document for our loan agreement that we signed together.

How did you add value to the deal?

I converted the 400 sqft two car garage into a studio apartment with a kitchenette and a bathroom. I also added a closet in the family room and walled it off to make a 4th bedroom.

What was the outcome?

Lots of cash flow! My PITI is $1600 and I rented three of the bedrooms for $600 and the studio for $1,000. I have since moved out and I rent 4 bedrooms each for $650 and the studio for $1500.

Lessons learned? Challenges?

Take advantage of times when people are scared. Trust yourself and the numbers you've ran. Double the time that contractors say it will take to get a job done.