Basecamp for World Travel

[Jess Thompson]

Investment Info:

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

Purchase price: $130,000
Cash invested: $36,000

My first investment was a duplex in Southern Oregon. I started by renting one side while living in and fixing up the other side. This was enough to cover the mortgage at first. With some improvements and local rent growth, it's now cash flowing well. I've moved to California and I'm definitely interested to try this again.

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

Honestly, I had been trying to figure out how to sustain my ability to travel. I still am. The year before I bought the house, I quit paying rent and moved into my minivan. I went to three new countries, did a whole lot of rock climbing, and still worked close-to-full time with a flexible position as an ICU nurse. And while I highly recommend the van life to anyone adventurous.. I did start missing things like cooking dinner with friends and gardening. Solution: House Hacking.

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

With an agent, right off the MLS. It was bank owned and took five months to close, partly because the place needed new heaters and HVAC in both units. I asked the bank to replace them with high efficiency new ones of my choosing and to cover closing costs, in turn I paid $10K over the agreed on price of the house. I wouldn't have had the cash otherwise.

How did you finance this deal?

Traditional 20% down loan. I saved my down payment by living in the van and asked a little help from my family.

How did you add value to the deal?

I did a lot of DIY improvements on one side: flooring, landscaping, kitchen, bathroom. Five years in, rent on that side went from an estimated $650 a month to $1050. Some of this was luck of the market, some was the improvement.

What was the outcome?

Covering the mortgage by house-hacking didn't actually make my rent go away. It just meant that I was paying "rent" in house repairs and by working at my new job as a landlord. Initially, this was a break-even proposition that cost a lot of work. My climbing partner got pretty upset when I was scraping glue off my abused hardwood floors instead of training. That said.. it's certainly flexible and engaging as a job goes. When I hit the road again, the house paid for itself and more.

Lessons learned? Challenges?

- DIY won't always save you money. Factor in lost rent in the time it takes to complete your project, as well as what you'd pay yourself for your time.
- Neighbors are your best allies. Mine still call me if anything happens to my house or my tenants cause problems.
- Fire your property manager the second time they mess up. Don't wait.
- Repairs and CapEx really really are around half your monthly cost.
- Renting furnished in a cheaper neighborhood gets you terrible tenants. Not worth it.

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

Josh Kelleher was a great agent, for anyone looking in the Rogue Valley, Oregon. As far as property management.. Asurent Property Management was an utter nightmare. So far Northwoods Property Management has had no issues.