Higher End House Hack Flip with Furnished guest suite unit, mid-term rehab strategy

[Michael Ball]

Investment Info:

Small multi-family (2-4 units) fix & flip investment.

Purchase price: $534,500
Cash invested: $70,000

Zoned SFR, the property is set up like a duplex with a 1-bed guest unit. The home had been a rental for the past 8 years. My wife and I purchased to renovate as our primary for 2+ years. We furnished the 1-bed unit as a guest suite, perfect for when we have people in town and a short-term rental. We strategically purchased the home based on a low price/sqft for the neighborhood. We have a final exit strategy integrating the unit making a larger SFR and selling for a 20% return.

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

This is my 9th residential renovation. I've always wanted to own residential rentals. This was more house than we needed to live in, but with the furnished guest suite rental opportunity, it made sense for us to sell our 1st house in Tampa following rapid appreciation and use the equity to renovate this property.

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

My wife found it on Zillow searching for low price/sqft options in desirable neighborhoods. Our buyer's agent works for a family friend as their mortgage expert and was our lender too. The house was owned by a multi-billion dollar SFR rental company, it was a very formal cut-and-dry negotiation process. We hadn't sold our primary yet and didn't make it contingent. Speed was important to all parties, interest rates were spiking around 5% at the time.

How did you finance this deal?

Conventional primary mortgage with bought down rate points.

How did you add value to the deal?

We were open to a quick close. Our lender was able to get financing approved in half the time of the typical average duration.

What was the outcome?

The property is renovated and great to live in. My wife and I both working remotely, we GC'd the work and did a good portion ourselves sacrificing sweat/time and living in a construction zone. The furnished unit has had consistent demand, we have a good cadence managing the unit. We are improving our pricing strategy and have cleaners lined up when needed to automate the management. The rental income is allowing us to purchase a summer rehab up north to rent in the off months and snowbird.

Lessons learned? Challenges?

Had setbacks hiring unskilled, unreliable neighbors to do work on the cheap that I had to fire. High-end appliances aren't only expensive, they require upgraded electrical infrastructure and detailed installation requirements impacted by flooring, cabinet, and drywall that you have to take into account. In the past I did more of the work myself, I'd have better detailed RFPs for contractors to bid on work so that there's an understanding of the level of finish work I require as acceptable.

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

Absolutely, happy to share on an individual request basis.