Duplex House Hack 10/2021

[Sarah Msuya]

Investment Info:

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

Purchase price: $600,000
Cash invested: $80,000

We currently live in half and rent the other half. Its a beautiful duplex that is basically two single family homes attached by a porch. We had the previous tenants leave and were able to handpick our new neighbors and its worked out very well. It's needed minimal work and has provided our family with the bigger home we needed. Overall, an awesome deal!

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

After having a baby, we needed more space. We were open to a house hack situation if we could find a solid multifamily that we felt comfortable living in. Having a new baby, comfort was important and we weren’t seeing the right MF, so we ended up putting in offers on single family homes and even got one under contract. We ended pulling out and then found this beautiful duplex!

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

In September 2021, it came on the MLS for $600k. I immediately texted my agent and we got the very first showing. I offered full asking price with a $10,000 EMD. I knew there were multiple showings scheduled after ours and I wanted to take it off the market quickly. It worked and we got it!

How did you finance this deal?

We used an FHA loan that allows you to finance a single family up to a 4 unit residentially. We got an amazing interest rate of 2.375%, our PITI was $3008.63, and planned on putting 3.5% down. However, part way through we realized that the FHA limit for a 2 unit was $525K and we were under contract for $75K over that!
I used a 401K loan for $30K, a personal LOC for $20K, a HELOC for $35K, and a little bit of cash when all was said and done!

How did you add value to the deal?

So far we have repainted parts of both units. We fixed the decks and repainted that and the trim. We replaced a toilet and have repaired/replaced components of both heating units.

What was the outcome?

We live in one side and rent the other side. Our part of the mortgage is $508 and the other side pays the rest. It's not cash flowing but its signficantly reducing our living expenses while appreciated and having someone else pay down the majority of the mortgage!

Lessons learned? Challenges?

1. Know the FHA limits by number of units for your area.
2. You can use projected rental income to help your DTI on a small multi-unit.