Home-run House Hack (HHH) in an expensive city!

[Caleb Webster]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $382,000
Cash invested: $50,000

I call this one the BEIGE INVASION monstrosity. It's a whopping 5 bedrooms and 3 bathrooms and 2800sqft of elbow room. All mechanicals were updated by the investor/hardmoney company and everything updated cosmetically. It's basically a new home with the bones of a 100 year old house. I hope I look this great when I'm 100!

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

I knew how many bedrooms I needed to have to be able to afford to live in the neighborhood that I wanted to live in. This was the only house I saw that fit my criteria after looking for almost a year.

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

This house has a VERY confusing history. From what I could piece together, someone tried to flip it but ran out of money before finishing the renovations. As a fellow investor, that one hurts. The hard money lender (one of the bigger outfits in town) repossessed it and finished the renovations. Everything was redone, electrical, plumbing, HVAC, roof, you name it. The hard money company then listed it for waaay too high and it sat on the market. I swooped in and offered $50k under asking which of course the sellers were stoked on. NOT. But they countered and I countered and they countered and I countered and at the end of the day I came up $7000 from my original offer and they came down...$43,000. So I'd say that was a win!

How did you add value to the deal?

I bought it under value because the house was 3x the size of the average home in that neighborhood and most people simply weren't in the market for that much house, at least not in that neighborhood of mainly starter homes. The current value of the house is somewhere around $500k which is $120k more than I paid a year ago. As soon as I can qualify for a refinance (need 2 years of self-employment returns) I will lower my interest rate from 4.9% to hopefully somewhere <4% and pull out my initial capital, making for a great BRRRR!

What was the outcome?

I immediately rented 4 out of the 5 bedrooms and moved into one of the bedrooms myself. I now live rent free in Portland! This house hack has been so much more successful than I could have imagined and has given me the confidence and freedom to take bigger risks in real estate.

Within the next year my goal is to put a kitchen in the basement and make it a separate unit. This will have 2 advantages: it will be much easier to rent a 2/1 unit and a 4/2 unit than a 6/3 house AND it will make more money.

Lessons learned? Challenges?

Be VERY specific when setting search criteria for properties. I only had a handful of houses show up in my automated search over the course of months which made the deal hunting process much less overwhelming.