Successful First House Hack

[Jacob Henderson]

Investment Info:

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

Purchase price: $78,000
Cash invested: $7,000

This was my first house-hack. I used a 3.5% FHA loan and live in one side for free. Once I move out I will conservatively be able to get about $330/month in cashflow after accounting for vacancy, maintenance, capex, and property management.

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

This is a deal that I could use to get my feet wet. I had been listening to the BP podcast and thought it was the smartest move to start my real estate investing career with a house-hack. This has allowed me to learn a lot about the real world of investing and has been a low risk way to enter into REI.

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

This deal was from the MLS. It had only one blurry photo of the exterior and I originally just scrolled past it. A few days later I came back to it, read the description, drove past it, and started calling realtors so I could see inside. One side of the duplex needed a lot of cosmetic work and the other side was in great shape. The seller wanted $80K for it and I initially offered $75K with up to $4000 in closing costs paid for. We came to an agreement at $78K with $4000 in my closing paid for.

How did you finance this deal?

I used a 3.5% FHA loan

How did you add value to the deal?

I completely remodeled the interior of the unit that I am living in this first year. My side of the duplex is only 600 square feet and I did all of the work myself so the total cost of the renovation was only about $4900. When I purchased this property, both units were significantly under market rent. I was able to gradually raise the rent on my tenants to market value since I fixed some of the issues the previous landlord neglected. Once I move out of my side, I will rent it for market value.

What was the outcome?

I have been living for free and saving a lot more money to invest on future deals.

Lessons learned? Challenges?

During this time I have learned a lot about renovation, budgets, managing tenants, and navigating difficult problems. Mostly I learned that I should use a contractor on future deals. My life was a rat-race for a couple months because I was working full time and doing all of the renovation work myself. Also, I wish that I would have offered less to begin with.

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

I found an investor friendly agent that wasn't pushy and helped me thoroughly understand everything. To make a long story short, I know work as a realtor alongside this agent, who is part owner in the brokerage I work for, At Home Wichita Real Estate. Many doors have been opened for me since I took the leap into real estate investing.