House Hacking or Multifamily

[Fernando Palomo]

Investment Info:

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

Purchase price: $390,000
Cash invested: $30,000

It’s a 5 bedroom 4 bathrooms single family, divided in 3.
A 2 bed 1 bath in the front.
A studio, also in the front.
And a 2 bedroom 2 bath in the back with a decent backyard.

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

The idea of house hacking and having someone else pay my own mortgage or reducing the amount for me to pay. In order to continue to save and invest.

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

Found it myself on Realtor.com, offered the asking price, the appraisal came lower than the asking price and was able to buy it for the appraisal amount, $50,000 less.

How did you finance this deal?

Sold the apartment I had and got and FHA loan.

How did you add value to the deal?

I had to right away get new windows, many of the old ones weren’t working properly, so I installed impact windows and doors. I’m still paying that debt. I need a new roof ASAP, but don’t know if to finance them, use equity or wait and save the money for it.

What was the outcome?

My mortgage and utilities add up to $3,900 monthly and I collect $4,300 in rents.

Lessons learned? Challenges?

I sold an apartment I had in order to buy the house. I believe it would have gone smoother if I would’ve just gotten a line of credit and kept the apartment. Lesson? Do some research, learn and surround yourself with the right team when doing business, not your girlfriend’s dad who just started as a realtor and you want to help him get his first deal done.

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

Not that I would recommend.