First investment property (Houston, TX)

[Matthew Sweere]

Investment Info:

Townhouse buy & hold investment.

Purchase price: $385,000
Cash invested: $20,000

My business partner and I bought a 4-bed, 4-bath townhome in November, 2020 that we are now house hacking with two of our friends. While the cash flow is not positive, it significantly reduces our amount of escrow payment having two others live here. Considering we bought the home before getting into real estate investing, I don't find it to be a terrible deal as it would cash flow with 4 tenants.

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

We liked it because it could easily be house hacked with 3 floors. We wanted a home that we felt could be turned into a full-time rental once we left and this home can be rented out by room or as an entire unit.

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

My business partner found this deal while just looking at different homes. We had brought in a real estate agent to negotiate the deal as we were just out of college and didn't have much experience with real estate.

How did you finance this deal?

We used a conventional mortgage with a 5% down payment. We didn't have a lot of cash upfront as we were just beginning our first jobs out of school.

How did you add value to the deal?

We didn't know about adding value to deals at the time. We just negotiated for the seller to provide money towards our closing costs

What was the outcome?

We're currently house hacking, earning $1000 in rent from each of our two tenants.

Lessons learned? Challenges?

Don't put all your money into a deal. If you have to do so, the deal timing is probably not right for you. Doing that has put us to square one with regard to saving up for a future deal.