Living for free in the Bay Area! 4Plex Househack

[Anthony Chao]

Investment Info:

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

Purchase price: $840,000
Cash invested: $29,400

Living for free in the Bay Area? Check. $5300 in rent coming in monthly from three units, $5300 in PITI & Expenses going out monthly.

Fully rented out, this fourplex brings in close to $7200 a month or $22,800 a year. With $29,400 in the deal, cash on cash return after one year will be around 76%.

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

I was interested in house hacking in order to reduce my monthly housing expenses.

I currently own a 3/2.5 condo, but PITIA is about $4000 a month. After renting out two rooms, my monthly housing costs on the condo are ~$2000.

I plan on moving into the 4plex, renting out the last room in the condo for $1600, in order to reduce my monthly housing expense to approximately $400.

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

Redfin. The deal was listed at $695k. I initially offered $725k, was not competitive. Had to come up to $800k, then $840k. In the end, the seller was deciding between three offers: $845k, $840k, and another $840k offer. I think the main reason the seller took my $840k FHA 3.5% down offer was because of their personal connection to my situation (first time FHA user growing a portfolio with a fourplex househack).

How did you finance this deal?

FHA Loan (3.5% Down)

How did you add value to the deal?

1) Requested credit for repairs called out in inspection 2) Requested buyer rebate from agent

What was the outcome?

Living for free in the Bay Area. Potential for 76% CoC return after one year of occupancy.

Lessons learned? Challenges?

If you're buying multiple properties at the same time using financing (e.g. buying a duplex and a quadplex within a month of each other), consider keeping a separate checking account for each property's closing funds. My lender requested an audit trail for every transaction greater than 1% of the purchase price of the property (e.g. all transactions with value greater than $840,000 * 0.01 = $8,400). The mix of earnest money deposits and movement of money slowed down this 4plex transaction.

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

Matt Goodwin (Lender at https://people.rate.com/matt-goodwin-624013) and his team did a great job helping me close my loan. Pricing was competitive and they were able to close an FHA loan within nearly 30 days.

Catherine Kim (Loan Coordinator on Matt's team) especially stood out. She was a rockstar who helped keep everything together to the end. Unfortunate timing, but Matt was on PTO toward the last week or two of the deal. Catherine stepped in and held the fort down. Thank you Catherine!