Duplex house hack that we used to add 2 units to our portfolio

[Joshua Kulzer]

Investment Info:

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

Purchase price: $275,000
Cash invested: $15,000

Whole duplex purchased with an FHA loan as a house hack.
1/2 acre
Fully leased
$2700 in rents
$2200 in expenses
$500 cash flow

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

Multi-Family homes are an insurance policy against vacancies. Two units side by side in a nice area, does not stay vacant for long. Has only had a 6 week vacancy due to ****** tenants trashing the place, needing repairs completed before filling.

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

We found the deal through my real estate agent. He was looking for multi-family properties for us that we could live in and fit a family of 6! This was a very nice property needing very little work. We had the seller replace the roof and touch up paint. Roof was replaced, but cosmetics were not done, even though they were agreed to. Seller was going through a divorce, selling 2 properties in this sub-division. Took a lot longer to get the security deposits and prorated than anticipated.

How did you finance this deal?

FHA
Down Payment from my 401K - 3.5%

How did you add value to the deal?

We fenced in the back yard, changed out the builder grade faucets with higher-end, brushed nickle fixtures. Everything else was really nicely done.

What was the outcome?

We bought it, moved into the 1-car garage side and lived there for about 2 months. In that 2 months, my wife and I got married, went on our honeymoon, returned to reality, and moved to the other side with the 2 car garage when the tenants moved out. We lived in that property for about 1.5 years before moving into a 4 bed 4 bath house that we already owned, but had renters. We ended the leases of those tenants and moved in! Kind of a crazy story, actually.

Lessons learned? Challenges?

SCREEN TENANTS MUCH MORE CAREFULLY!!! THE FIRST TENANTS I APPROVED FOR THE BIG SIDE WERE HORRIBLE!!!
I actually don't know how I could have done better. I called references, and they were great. They had a bit of a credit issue, but they made decent money. I should have dug deeper.

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

Yes! Rich Steffen! I recommend Rich all the time. Very knowledgeable and loves to teach. Rich and I have become good friends over the years. I really should give him a call...