First Deal Complete!

[Eli Poesnecker]

Investment Info:

Single-family residence buy & hold investment in Cibolo.

Purchase price: $219,900

This was a House Hack using a 5 Bedroom, 2.5 Bath 3634 sq ft. SFH located in Cibolo, TX. I purchased this home with no money down as a VA Loan, and paid the asking price of $219,900 with $6,000 in closing costs covered. There was work that needed to be done on the house, including about $1300 of A/C work and a little over $3000 in wood rot damage on the exterior. These were covered under the $6,000 in closing costs, and the rest went towards the mortgage balance.

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

Although I'll only be in the San Antonio area for a relatively short while (about 9 months), I didn't want to spend my money on rent. I wanted to get a jump start on investing in Real Estate, so I decided to do just that! Instead of splitting the rent with other people to reduce the cost of living, I purchased a house and am living in one of the rooms. Right now each bedroom rents for $750/month.

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

This deal was shown to me by my Real Estate Agent on the MLS. It just came back on to the market after failing to be sold during the financing stage for the second time in a row. The other 2 parties before me negotiated the price from $249,900 to $219,900, so I really didn't feel like much negotiating was necessary. I did ask for $6,000 in closing costs to be covered so that I would not have to pay anything out of pocket.

How did you finance this deal?

I utilized a VA Home Loan, getting a loan for $223,419 @ 3.75% interest with $0 down. I did have to come up with the Earnest Money, and pay for a home inspection and things of that nature, but costs were minimal.

How did you add value to the deal?

I wasn't really looking to add any value currently, as I don't think it'll be productive. I think my money will be better spent on future deals. The floors, cupboards, cabinets, counter-tops, and appliances are all in acceptable condition. I will likely upgrade them at a later point in time, but I'm not in a rush to do so.

What was the outcome?

I am renting two of the bedrooms out to other Lieutenants stationed here at $750 each. When I fill the other 2 bedrooms, the house will generate $3000/month (with me living in the Master Bedroom), instead of the ~$1900/month it would bring in as a rental house on the market, and not giving me a place to stay. Renting out per bedroom instead of the entire house should make the house bring in a lot more income!

Lessons learned? Challenges?

Some people are not as clean as others! There was a ridiculous amount of general cleaning that had to be done that was not appropriate for this sort of purchase. A full trashcan was left behind by the seller as well as leaving a fridge, motorcycle, bulky shelving, a lawnmower, and other things. I was not pleased at all, and will now hire it out. I had to go so far as to take apart the dishwasher and clean it due to it leaving residue on all of the "clean" dishes. I won't make that mistake again!

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

Sara McCaffrey with Keller Williams Realty was the Real Estate Agent that helped me tremendously with every aspect of the deal. I couldn't recommend her enough. I also really appreciated Mark with MBK Inspections as a home inspector. He went above and beyond what was necessary, and did a fantastic job. Either one of them would be a great member of a Rockstar Team!

[Eli Poesnecker]

I paid $60.51/sq foot, when I was looking at more complete turnkey homes going for over $90/sq ft on average. I got a lot more house for less money, and I think it will prove fruitful. 

I have also implemented a strategy to make the deal more enticing to potential tenants. I furnish the bedrooms with basic necessities, including: Bedframe, Mattress, Nightstand, and Dresser. This allows the Marines to move in without having to go out and buy anything. There's 3 fridges in the Kitchen, a huge 65-Inch TV in the Game Room with a surround sound system and large leather couch, as well as a mini fridge (with plans to have a pool table in there as well)! 

The goal is to make the home appealing to Marine Officers who are single, looking to save money on their rent, and yet not have to go out and buy anything. They can move in very easily and enjoy a fully stocked kitchen with dishes and utensils, things like a nice mop and vacuum cleaner, lawn mower, etc. For this convenience (and to defray the cost of wear and tear on the items in the house), I have each tenant pay a one time fee of 20% of the cost of their bedroom furnishings. This means that after 5 tenants, the furnishings will have cost me nothing. In addition, each tenant pays 6.25% of the cost of the total acquisition of the common area items. This includes everything from the TV to the sofa, to the fridges. Anything that is shared by the house goes into this cost. With 4 other tenants living here (and I taking up the Master Bedroom), that totals 25% of the cost. This means that even all of the other items will be paid off in 4 rotations of tenants (technically sooner once I move and can rent out the Master Bedroom). 

I currently receive $750/month per bedroom. This currently brings in $1500/month. Utilities are split 3 ways. My mortgage, escrowed with my property taxes and insurance costs me $1636/month. So I currently pay $136/month to live here. This is cheaper than anywhere I could've possibly rented. I came up with the figure of $750/month due to the fact that it is 50% of the housing allowance given to Lieutenants in the military in the San Antonio area. Nicer apartments will run them $900/month. This gives them all the amenities of a fully stocked, large house, and living with other guys going through the same training they are, while allowing them to pocket 1/2 of their housing allowance. 

If anyone has any questions or words of advice, I'd love to hear it. Thanks!