First Property - House Hack and Buy & Hold

[Joel Heck]

Investment Info:

Single-family residence buy & hold investment in Westminster.

Purchase price: $349,000
Cash invested: $64,000

This is a house-hack turned single-family rental. The goal was to lower my living expenses while I lived there, and break even on cash flow when I moved out to build up long-term wealth. I finished the basement to be able to add a second roommate and make it a better long-term rental as a 3 bed/3 bath. While living there, I averaged about $800 in expenses with the roommates covering the rest, which is about half of what I was paying to rent. Now it has a small positive cash flow, which will increase to about $100 once I get PMI removed.

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

House hacking is a good way to get started with real estate investing, and learn with lower risk. It allows me to increase my savings rate to buy other properties, and to get a lower owner-occupied mortgage rate and downpayment.

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

I found it on the MLS. I only negotiated that the sellers fix a few small things, like a broken sump pump.

How did you finance this deal?

Conventional 30-year loan with a 10% downpayment

How did you add value to the deal?

I finished the basement, turning the property from a 2 bed/2.5 bath to a 3 bed/3.5 bath and adding 50% more finished space. I also built a ground-level deck in the enclosed courtyard, which made the space much more usable and covered up a concrete swale.

What was the outcome?

I had three roommates over about 1.5 years, bringing in between $750 and $1495 total per month. I had about 3 months of vacancy between the first roommate and the second two because I found it hard to find applicants between October and January. I found a tenant within 3 weeks of moving out, and so far they have been great.

Lessons learned? Challenges?

The biggest lesson is to get the turn over period into spring or early summer when most people are looking to move. I don't think you need all of your documents and forms ready to go on day 1 for a house hack, though it helps. You just need a process ready for the next step so that you're not scrambling at the last minute. Over time, you'll figure out what systems you need.

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

I got my mortgage with Elevations Credit Union in the Denver area. They were easy to work with, and I used them again on my second property.