Dipping Toes into Investing with Owner Occupied Duplex

[Andrew B.]

Investment Info:

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

Purchase price: $285,000
Cash invested: $14,000

Owner-occupied house hack. Cash flow is pro-forma as if it were 100% tenant occupied at market rent.

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

Wanted to decrease monthly expenses by moving out of our downtown Cleveland condo into a property we would eventually hold as an investment property. Opportunity to get comfortable with being a landlord in a lower stakes situation. Reduced our PITI from $2,800 to $1,900 so even if we didn't rent out the other unit, we improved our personal cash flow.

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

Found it on the MLS from a flipper who was going through the city and doing a lot of renovation projects. Missed out on an earlier property they renovated but stayed in contact with them and was able to put in an offer on this property as soon as it was put on the MLS.

How did you finance this deal?

FHA Financing

How did you add value to the deal?

The value add on this deal is that we were able to secure this property for low money down due to our occupancy of one unit. The unit was fully renovated and has all brand-new mechanicals which should keep maintenance, repairs, and capex low for the next few years.

What was the outcome?

It will generate $400 month of cash flow once we move out and our total cash contributed to the property to date is $14,000. We are "paying" ourselves market rent right now to keep the property capitalized so when we move out, we will have contributed $30k total to the property for approximately 16% cash on cash from that point on. Cap rate is approximately 7.8%. All figures are using 5% gross rent each for vacancy, maint/repairs, and capex.

Lessons learned? Challenges?

Jumping through the FHA hoops was a challenge but it was worth it.