First House Hack/BRRRR Deal

[Jennifer Turner]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $175,000
Cash invested: $17,836

Our first deal! Initial "cash flow" after a full remodel and getting all 3 of the extra bedrooms rented out was -$354.
9 months later we refi'ed into a conventional loan, bumping our cashflow up to $132. Rent rates have increased annually as have taxes and insurance, so cashflow has varied but been as high as $411/month while owner occupying. Best part is we only have to pay a fraction of utilities, since they're split between roommates. As of July 2023, this house is valued at $402,000.

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

We wanted to get started in REI and preferred to have other people pay our mortgage for us. ;-)

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

Our agent brought us an off-market, expired listing. It was a vacant, inherited property with a lot of deferred maintenance.

How did you finance this deal?

FHA 203K Loan. We put 3.5% down and wrapped the entire rehab into the loan.

How did you add value to the deal?

We did a full cosmetic remodel, replaced the roof and HVAC, updated plumbing and electric, expanded the kitchen, added an office, and took down some walls to open up the floor plan in the common areas.

What was the outcome?

My husband and I have kept our total housing expenses over the last 4 years between $0 and $700/month. Without this first house hack deal, we wouldn't have been able to save up capital for our next several deals.

Lessons learned? Challenges?

We inadvertently got a PhD in tenant screening, lease enforcement, contractor management, and order of operations for rehabbing.
The 203K Loan was essential for us to get our feet in the door, but if given the option again, we would choose the conventional financing route and cash-flow the rehab ourselves (or with 0% credit), rather than jumping through all the hoops required by the FHA.

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

We used Chris Doering Mortgage out of Gainesville, FL, and have used them for multiple other purchases/refinances since then. They understand our goals as investors and always have the best customer service.
Our agent Michelle Florence was also a rockstar. She was born and raised in the area and has worked this market for well over 20 years, so she knows everything about the town and just about everyone in it.