Primary Residence House Hack Turned Rental Property

[Cully Ladino]

Investment Info:

Single-family residence buy & hold investment in Colorado Springs.

Purchase price: $255,000
Cash invested: $14,250

We purchased this as our primary residence in July 2018 and immediately started house hacking. We actually had paid off this house and decided to start another house hack and moved to a new primary residence the end of March 2021. We fully rented 7779 in April room-by-room as we are in a high priced market and we make more this way than with one family renting. We refinanced this home in August 2021 (appraised at $368,000) to pull the equity out and use on our next investment property.

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

My partner is very creative and tries different ways to make more money. He had been renting space in his apartment before we bought our house and knew we wouldn't need all of the space. Even with our 3 kids, we lived in two bedrooms on the main floor and rented two rooms in our basement.

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

Since this was our primary residence, we went a traditional route through a realtor.

How did you finance this deal?

Conventional loan

How did you add value to the deal?

We added another wall in the basement to make the 3 bedroom into 4.

What was the outcome?

We were able to pull the equity out of the property and are looking for our next investment property.

Lessons learned? Challenges?

When refinancing we worked with a lender that specializes in financing for real estate investors. However, since we rent room-by-room and didn't have two years worth of tax returns, the underwriter wouldn't include the rental income in our DTI calc. In retrospect I would have looked into other lenders and options, possibly commercial financing.