House Hacking on accident all the way to infinite ROI

[Jordan Barnes]

Investment Info:

Single-family residence buy & hold investment in Lake Stevens.

Purchase price: $357,000
Cash invested: $18,000

This was my first investment, a SFH bought with a 3.5% down FHA loan. I had struggled for almost 2 years to find a duplex and eventually landed on new construction in one of the best school districts north of Seattle, WA. I was 23 at the time and my goal was to buy a home that I could have renters pay my mortgage, I actually was trying to house hack before I had heard the term.

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

This investment was born out of frustration more than anything else. In 2015-2017 I found myself in the middle of one of the hottest markets Seattle had ever seen. On every duplex I was competing against cash buyers and seasoned investors, with a measly 3.5% down... But my goal was to buy a house that I could rent rooms out to friends so I could live for free.

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

My agent and I found this on the MLS (new construction) but when I first started looking in this market this build had just begun so i hadn't noticed it. There was no negotiating, I actually bought the last house available on the whole site!

How did you finance this deal?

FHA loan for first time buyer, 3.5% down plus closing. No closing cost could be rolled in and i actually had to scramble to pull out a loan against my 401k to cover the closing, and my agent gifted $1000 of his commission to help.

How did you add value to the deal?

I built a fence around the yard, and bought a SS fridge and nice W/D set. Knowing it would be best to have those things in order for when I moved out and rented the whole house. I did just this in august of 2019! Now my wife and I collect $6k a year extra, and watch that market appreciate 8-10% year over year.

What was the outcome?

I still own the house now, as it CF $500/month. And in first my year I was able to get my entire down payment back from renting out rooms, giving me infinite ROI! I self manage the property as the tenants are very low maintenance.

Lessons learned? Challenges?

My agent at that time was brand new, and to no fault of his own his experience definitely cost me big time in the long run. So main lesson is get a rock star agent or if you find yourself in my shoes ask your agent-friend to get a Rockstar agent to partner with them to split the commission on your purchase. And save way more cash than you think you'll need!