House Hack in Metro Detroit - Completed

[Andrew Powers]

Investment Info:

Single-family residence buy & hold investment in Royal Oak.

Purchase price: $120,000
Cash invested: $20,000

This is my first investment property. In 2019 I bought a large single family house in the metro Detroit area. I house hack by living in one room and renting out the others. It is important to me that the numbers work correctly. I live in the house for free + my roommates cover allowances for cap expenditures, minor repairs, and vacancy. It has been a great experience!

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

I wanted to purchase a house that my roommates or tenants would cover the costs. My comfort level allowed me to be OK with having roommates & target a not-so-typical type of house in the area (large single family).

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

I found it on the MLS. I was originally looking for small multi family, but after hearing Podcast 350 with Craig Curelop, I thought it was an interesting idea to pivot and search for large single family instead. That night I found this property (4 bd, 3ba). It needed a decent amount of work so the first offer was at 75% value, and then we met at $120,000. Even at this price, the numbers worked great.

How did you finance this deal?

I used the first time home buyer conventional loan. It is 3% down payment with the requirement that I take a first home buyer course (funny story about this later).

How did you add value to the deal?

The house was kind of a "half flip" where it looked ok (ie new interior paint, carpet, etc) but still needed a decent amount of work. It needed new mechanicals in the basement. Before moving in, I had a boiler installed. Then as time went on the hot water heater, washer/dryer, sump pump were replaced. All the mechanicals are new which keeps cap-ex low for now on.

What was the outcome?

I live in the house for free, and rent out the other rooms which covers PITI, cap ex, repairs, vacancy. I manage this property which helps me develop my excel "checklist" systems (maintenance, on boarding and off boarding tenants, etc). The roommates situation has been great, especially because of the house set up. 2 of the 4 bedrooms have their own large living spaces and own bathrooms.

Lessons learned? Challenges?

When under contact - lots of repairs were agreed upon, but not completed multiple times. Having a better template for scope of work would have been best to reduce time wasted (3 weeks) and less stress for all parties.

Funny loan story - I used a great lender but they made a slight mistake. They did not submit my paperwork for the first time home buyer course. Long story short, after 1 month I had to refinance with them at no cost to me... I ended up saving $50 per month with a reduced interest rate.