Investment Info:
Small multi-family (2-4 units) buy & hold investment in Phoenixville.
Purchase price: $220,000
Cash invested: $25,000
This was my first home and my first house hack. Bought a duplex on a 3.5% down FHA in a great up and coming Philadelphia suburb with plenty of charm. The place needed a lot of upgrades, but all cosmetic items that could be done piece by piece. When I bought it, the first floor unit was rented for $750. I moved into the top 2 floors, renovated over a year, and then moved downstairs, renting the top floor for $1,275. At the time the mortgage was around $1,700 so I wasn't cash flowing, but I was living for cheap. After another year and a half (with a complete renovation of the first floor unit exposing brick, original wood floors, replacing the drop ceiling with recessed lighting and crown molding, and a new kitchen) I ended up getting married and moving out. I rented the first floor unit for $1,100. The rents are currently $1,300 and $1,200, cashflowing $375/mo after expenses. We just refinanced into a 15 year note and got rid of PMI- saving us $97,000 over the life of the loan after the property appraised for $278,000.
What made you interested in investing in this type of deal?
I loved the neighborhood and planned to live there for a long time. My brother and I were into multi families in the area and this was too expensive for our company, but with a 3.5% down loan was a great first time homebuyer house hack.
How did you find this deal and how did you negotiate it?
This was listed on the MLS, and I moved on it quickly. I had actually agreed to pay more for it, but the property didn't appraise. We ended up agreeing on the appraised price- which saved me $18K!
How did you finance this deal?
First time homebuyer FHA financing 3.5% down.
How did you add value to the deal?
Exposed hardwood flooring, added granite and tile kitchens to both units, upgraded appliances (added dishwashers), exposed brick wall in first floor unit... some sweat equity and small contractor projects.
What was the outcome?
With the refinance this house should be a great piece of our retire early scheme when we hit 50!
Lessons learned? Challenges?
I probably treated this house too much like my own home and spent more than I needed to on renovations while I lived in the home. At the time I was living there so I wanted it to look nice, even though I knew it was a long term rental. In the end I can now command higher rent and better tenants.
