Partnered with my brother to buy my first house hack!

[Matt Alrutz]

Investment Info:

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

Purchase price: $360,000
Cash invested: $85,000

For my first deal, I partnered with my brother to house hack a duplex in Philadelphia. This is a front/back duplex that was almost turnkey, but had opportunities for forced equity, including remodeling the shower in the front unit.

This duplex is a great example of a property that doesn't come close to the 1% rule, but still cash flows. We inherited tenants in the back unit paying just below market rate, but since they pay for everything except water, sewer and trash, our operating expenses are kept very low. In addition, while our purchase price was high since we bought at the peak of the market, our interest rate is incredibly low, reducing our monthly payments.

All told, once we rent out both units, we'll be able to cash flow roughly $600/month (~9% CoCROI) after setting aside money for repairs (5%), vacancy (7%) and CAPEX (7%). This isn't factoring in loan paydown, tax breaks or the first year we're house hacking and not paying for rent.

Beyond the financials, this has been an opportunity to work with my brother and other family members to build wealth and learn through all the difficulties and challenges that come along with buying and managing rental properties.

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

My brother and I were both looking to house hack in order to cut back on our housing expenses and begin to build wealth through rental property investing. We decided to combine our efforts, expanding the range of potential deals for both of us.

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

We found this on the MLS and analyzed comps to come up with our top price when the seller called for highest and best offers.

How did you finance this deal?

We used an owner-occupied conventional loan with 15% down through a local mortgage broker.

How did you add value to the deal?

The property was rent-ready when we bought it (which is what we were looking for, since we knew we'd house hack), but we found opportunities to add value through remodeling the shower in the front unit.