The Complicated, Overreaching House Hack

[Collin Groves]

Investment Info:

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

Purchase price: $635,000
Cash invested: $10,000

Before graduating grad-school, I was looking to get a house with a rentable backhouse. This property came about just over my budget. However, the seller was quite distressed, so I teamed up with a private money lender to offer $150k under original asking price. This was a flip that was about 90% completed. I rented out the back house for $1525/m, house hacked the main for $1700/m, and got to work on the house for about $10k. Sweat equity and a forgiving market earned a refinance of $800k.

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

Distressed sellers are a two-edged sword. They are motivated by closing within a month for all cash, but they can also be unreliable in their word and their work.

How did you finance this deal?

Private money. I only did this because I knew this house was a deal. The market overlooked it because it had not been kept up since it had been remodeled. Most people looked at the front yard and saw a forest. I saw a couple weeks of Houston summer and yard tools.

Lessons learned? Challenges?

Just because someone has flipped properties does not make them good at flipping. The work can be shoddy, the people can cut corner, and money tends to be the only motivator.

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

Real estate agent