Who Else Wants to Live Rent Free?

The IDEA

After listening to BiggerPockets for three years, reading dozens of books and audiobooks, being inspired by countless people who shared their stories, my wife and I made our first real estate investment purchase. It was a 4plex. 

We decided to house hack so that we could live rent free. Scott Trench's book, Set for Life, resonated with us. We knew that if we wanted to achieve financial independence early, we were going to have to live in an unconventional way. House hacking is a financial accelerator. The concept of turning your biggest expense into an income producing asset made so much sense. We knew this was what we wanted to do, we just didn't know how.

The Implementation

We live in a very expensive area. The cost for housing is extremely high! Many young people decide they cannot afford to buy a home in our area, so they move and relocate out of state or to more affordable areas. We love where we live so much that we decided we wanted to do whatever we could to plant roots and stay in our community.

We watched the market for years. We prospected, sent direct mail, and proactively searched for property. One day, a new listing came available. It was a 4plex for $560,000. When we saw it we immediately knew it was a deal. The listing agent was from out of the area and under priced it significantly. Usually multiunit properties in our area to go for $200-300K/door. This was priced at $140K/door - a true deal! The property was also about a 1/3 acre and had a front house and a triplex behind it, which is a really cool set up.

We put in an offer on the property and were one of nine potential buyers for the place. We got beat out and thought it was over. A few weeks later we got a call from the listing agent asking if we still wanted it and we said yes! The buyers were backing out, we just needed to come up to their price of $575K (which is still a great deal for our area at $144K/door!). We weren't excited about coming up on price, but we said we would. Before we knew what was happening the listing agent had selected a different buyer that was all cash since ours was financed. We were bummed and thought that was the end of it. A few weeks later we got a call back asking if we were still interested. The second buyers had paid for all the inspections and reports and were backing out. We said yes of course we still want it! So we got it under contract!

As a self-employed real estate professional, my income did not count towards qualifying us for the mortgage since I had not been in the industry two years yet. My wife's income from her W2 job counted, and we could use the income from three of the units to help us qualify. Since we were going to be living in the property as our primary residence, we only needed to put 5% down, or $28,750. The rental income was about $3,500/mo, which totally covered our Principal Interest Taxes Insurance (PITI). We were now able to live rent free in the county we love!

A Few Lessons Learned Along the Way

1. The lender you work with matters! Not all lenders are created equally. One of the lenders we attempted to work with was less experienced and could not get us the loan we needed to qualify. It almost cost us the deal. We had to switch lenders midway through escrow, and the new lender totally came in clutch and helped us close the deal!
3. Know you market! We were able to quickly analyze the deal and realized that it was a great price/door. It also almost hits the 1% rule, which is very uncommon in our area.

1. Instead of living in the biggest unit, we chose to live in one of the smaller units. That way we had more income which covered all of the expenses.
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3. We were able to house hack for a year and then save up enough for another downpayment. We were then able to buy a bigger home which now suits our needs much better! We kept the 4plex and rented out the unit we were living in and now cash flow about $1,150/mo on that property.
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5. After we closed on the property, my wife was able to leave her W2 job and join me in our real estate businesses full time.
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7. We had to do a lot of work. There was a ton of sweat equity that we needed to do. We spent all summer with our family, friends, and contractor working on the project to make it much nicer before we moved into it. Check out the photos of some before and after pictures!

Overall, the first purchase was so important to do. You just have to take action and dive right in. Once you get the first purchase under your belt, the next one is easier. 

Do you want to live rent free too? If so, house hacking could be the way to do it! Please comment below and let me know what your thoughts are on our first investment!