Loving our house hack

[Eileen McCue]

Investment Info:

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

Purchase price: $268,000
Cash invested: $35,000

Purchased as a house hack/live-in reno project. This is a large duplex in a great neighborhood where we wanted to live. The front unit was vacant on purchase, so we refinished wood floors, painted and rehabbed the kitchen and first floor bathroom and swapped some rooms to even out the square footage and make the rear unit where we now live a bit larger. Now both units have 3 bedrooms and 2+baths. Siding needed to be completely redone as well. The ARV appraisal came in at $409K and covered the acquisition (with no money down) and some of the work that needed to be done. We were OK paying some of the reno cost out of pocket since this is our home and in a neighborhood that we wanted to live in. Now we get the benefit of the other unit being rented and paying the mortgage. We purchased with a commercial loan, so are planning to refi into a residential once we get a bit more of the work done in our unit.

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

This house hack was our way to afford to live in the neighborhood we wanted. We have our mortgage paid by our tenant and expect that appreciation will be strong as well.

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

This house was on the MLS for quite a while. We figure it sat for so long because it was too big for a single family and too small and pricey per unit for investors, and it was pretty ugly. The cedar shakes were so old they were falling off the building. We wanted to live in the neighborhood and while we would not have touched it as a pure investment property, it works for us as a house hack. We used a realtor and I think the sellers were motivated since it sat so long.

How did you finance this deal?

A commercial loan based on ARV, it was originally at 5.5% I believe, but we have since been able to get that reduced to 4.25%. We were able to get into the deal with nothing down at close because the ARV was so strong.

How did you add value to the deal?

We refinished flooring, updated electrical, rehabbed a bathroom and the kitchen in the front unit. We also painted the whole front unit and added a closet. We resided the building, painted the garage to match and repaved the garage driveway. We also added a door to the garage for easier access to the back yard and had the basement professionally insulated with spray foam.

What was the outcome?

We are still renovating the rear unit, mostly paint and flooring, updating some bathroom fixtures. We will refi into a residential loan in the next few months and anticipate being above the original ARV, potentially allowing us to pull additional funds back out.

Lessons learned? Challenges?

The siding project went form a 4-5 week job to a 6 month one, it also went 20% over budget. It looks great and the work is high quality, so we won't complain too much, but we will definitely be more clear with contractors regarding overages and timing in the future.

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

Yes! We worked with Sam Mitchell of Worth Real Estate who was great and Ben Sprague with First National Bank on the loan.