First House Hack Investment Property Performance Update

[Rylee Knox]

Investment Info:

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

Purchase price: $135,000
Cash invested: $5,885

In 2017 my then fiancé, and now wife, Emily and I purchased a 3 unit home in Augusta for $135,000 with a 30 year fixed FHA loan at 4.375%. We did about $3,500 in renovations, and rented two of the efficiency units for $625, and $750 per month. We lived in the property for 366 days, and then moved out and rented the 2 bedroom unit for $1575 to increase cash flow and save money for our next investment. We put 5,885 down on the property and it cash flowed $4,949 annually yielding an 84% COC Return

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

We knew nothing about real estate investing at the time, we were simply seeking an affordable place to live while we focused on paying off debt, and having a tenant to help pay the mortgage seemed like a great way to keep our living expenses low.

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

We used a local real estate agent who really knew what he was doing. We were the first to offer on the property and we offered full asking price.

How did you finance this deal?

3.5% down FHA loan at 4.375% amortized over 30 years.

How did you add value to the deal?

We spent about $3500 on materials and contributed a ton of sweat equity to renovating both of the efficiency apartments. We separated the electrical panels and added 2 additional high efficiency natural gas boilers so that the tenants could be independently responsible for their heat and electricity bill, increasing the cash flow significantly by decreasing our expenses. We also replaced the sewer line. We learned how to manage efficiently to increase the NOI of the building, increasing it's val

What was the outcome?

Today, just 5 years later, this property is worth about $300,000 and cashflows $14,440 Annually. If we were to sell this property today, our net cash flow on this deal would be over $238,000 and our Internal Rate of Return on this deal would be 237%. Our initial $5,885 investment has been returned back to us over 39 times.

Lessons learned? Challenges?

Efficiency apartments can be tougher to rent and have higher turnover than 2 or 3 bedroom units in my market.

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

We worked with Debbie Bodwell at Guild Mortgage in Auburn Maine. She was phenomenal to work with.

[Matthew Kwan]

Thanks for sharing Rylee! That's awesome that you were able to single family and separated the electrical panels to convert it into a legal multifamily property. What are your plans moving forward to expand your portfolio? @Carlos Valencia @Albert Bui