Fell into House Hacking, Emerging as an Investor

[Chris Collins]

Investment Info:

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

Purchase price: $675,000
Cash invested: $122,812

We went into this LA property with a SFR homebuyer's mindset. We had never read "Rich Dad Poor Dad" or heard the term "house hack." We began with an FHA loan at 5% down and have since refinanced and stabilized the property. We live in one unit, have great long term tenants in another, and rent out a bonus room with a separate entrance on AirBNB. We have learned a lot through the process, we continue to grow, and we will be going into our next property with an investor's mindset.

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

Buying a SFR in Los Angeles was doable for my wife and I, but we would have been "house poor." Therefore, we limited our search to properties that had income generating abilities.

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

We found this deal on the MLS through our agent. Our offer closed over asking with all closing costs covered by seller credits.

How did you finance this deal?

We put 5% down with an FHA loan, and we have been rehabbing the property while living here. Anticipating a drop in the market due to Covid-19, we expedited our rehab timeline, ordered a new appraisal, put a little more money down, and secured a conventional loan with minimal PMI.

How did you add value to the deal?

We renovated a bonus room and have increased income by listing it on AirBNB. We fixed some problems with in our long term tenants' unit. We rehabbed our unit with a new kitchen, bathroom, ceilings/recessed lighting, and some flooring.

What was the outcome?

We were able to purchase a property in a saturated market and refinance into a great 30 year loan. The property should cash flow when we move, should we decide to keep it.

Lessons learned? Challenges?

I now look at homes in a completely new way. I see the nuts and bolts as opposed to cosmetics. I also have a new appreciation for cap ex, repairs, and different options for financing. This deal would not have made sense for an investor, but the experience was worth its weight in gold as a house hacker. We will be staying here for at least two years, and then we plan to upgrade through a 1031 exchange or another FHA loan depending on the market and how our OOS investment plans turn out.

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

Arash Geserseh helped us secure an FHA loan when our previous lender claimed that he could not. We refinanced through Arash and his team at LendLA, and we plan on continuing to do business with them. Our agent was a pleasure to work with as a homebuyer, but I would not recommend him to an investor.