House Hacking with a Bit of Luck

[Lauren Garritano]

Investment Info:

Single-family residence buy & hold investment in Pensacola.

Purchase price: $250,000
Cash invested: $7,000

I picked this home out for my husband to purchase with his VA loan (no money down). This was before I was an agent and before we were married/lived together. He used to own a contracting business before going into the marine corps, so after buying the home he spent months updating the home and renting out all the rooms to other marines going to flight school here in Pensacola with him. It took less than a year to do the main updates and get the home filled with tenants. He and I still live here for now.

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

We were interested in building wealth and listened to Bigger Pockets podcasts daily for about 5 months leading up to the closing of this deal. We wanted to have financial freedom as well as be able to choose how our lives were going to play out. This gave me the option to be a stay at home mom when the day comes, and makes the choice for him to stay in the marines when his time is up a real choice.

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

I found the deal on Zillow, Andrew (my husband) told me the good areas in the market that he wanted to live in because I was house hunting from out of state and also created what we called a "home run calculator" which had a lot of the basic principles we learned from Bigger Pockets on what to look for in an investment. We would calculate monthly costs, rental income, repairs, capital expenditures, etc... to ensure the numbers worked out well and we just got really lucky on this house.

How did you finance this deal?

Andrew was able to finance the loan with no money down using the VA loan because he is Active Duty in the military. They can role closing costs into the loan so he really only needed a few thousand for the earnest money deposit.

How did you add value to the deal?

Andrew spent months updating the house, for a VA loan to go through the home needs to be in overall good livable condition but this home needed many updates to be marketable. He moved walls to open the layout downstairs (it's a split level), added 2 bedrooms to the house to increase income potential, painted almost every room in the home (they had a crazy green color), as well as worked on the outside of the home to increase the overall value and re did the kitchen downstairs.

What was the outcome?

We were able to solve a problem in the market while making money at the same time. Many service men and woman have to come to this area to learn how to fly planes but are not really given a lot of time to review properties beforehand. Many of the flight students also finish some of the training in TX, so if they all go in together on a home the ones that leave are the only ones out of the lease for the military clause so one person can be stuck with a huge rent bill.

Lessons learned? Challenges?

It is much harder to have respect from your tenants if you live with them and become friends with them. Pay attention to the people you are working with along the way and if they have your best interest-- Andrew still says he could have haggled more on the price but feels his real estate agent wouldn't let him. Pay contractors by project, not by hour.

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

We did not have luck when it came to help on this one, the real estate agent was not a good experience for him (I never met him) and the contractors we originally hired were taking forever and not doing good work unless we were here watching them.