Let's go back in time for a moment. It is 2014 and I am living in beautiful Tucson, Arizona. I am 34 years old, single and don't have any children. I also had recently completed my first real estate deal and bought a 4-plex in Phoenix, AZ. I had the real estate itch and I wanted badly to do another deal, but I knew that I just did not have the money for another 25% down payment.
That is when I heard a term here on BiggerPockets that I had never heard before "House Hacking". Apparently you could buy a 2-4 unit property using an FHA loan and only putting 3.5% down if you lived in it for a year. I got excited and I decided I was going to do it. The problem was that even with the low down payment requirement I just didn't have the cash.
Getting a little creative, I decided I would take out a TSP (401K equivalent) loan to cover the down payment. I then was able to get pre-approved for a $200,000 FHA loan.
I reached out to my realtor in Phoenix and she recommended an agent in Tucson who was an investor himself. I told him all of my criteria, which I will list below:
-4 units
-All 2 bed/1 bath units
-single floor
-all utilities paid by tenant
-built for purpose, no conversions
-located near U of A
-under $200,000
A few weeks later my agent calls me and says he found the property that fit my criteria and that it wasn't listed yet but I would have to act quickly because it would go fast. The seller wanted $152,000 for it. I told him to make a full price offer sight unseen and within a couple of hours it was accepted. The next day I drove and got a first look at my new home. It actually was in decent condition and in July 2014 we closed with no issues. In total I put about $5300 down and rolled the other closing costs into the mortgage. I later moved into one of the units and lived there for almost a year.
Fast forward to 2020. I'm now 40 years old, married and have a 9 month old daughter. I moved from Tucson to Omaha, Nebraska nearly 5 years ago for work. I had bought several rental properties in the Omaha area and I decided that the next step for me was to sell my property in Tucson and use a 1031 exchange to buy more properties.
On April 1,2020, my former house hack sold for $345,000. After everything I received $180,000.
I wanted to share this story to show the power of wealth building through real estate investment and to show people that you don't need a lot of money when you are getting started. For the entire year I lived in the property I lived for free and the rental income from my tenants paid down the mortgage and my utilities, plus put a couple hundred bucks in my pocket every month. After I moved out the property cash flowed $500-1000 every month after all expenses and the mortgage payment.
