Investment Info:
Single-family residence buy & hold investment in Las Vegas.
Purchase price: $175,000
Cash invested: $10,000
Sale price: $300,000
I purchased a 7-Bed SFR House Hack with 10K Down in Las Vegas. 6 bedrooms were rented for the following ($650 garage, $450 small bedroom, $600 large bedroom, $500 bedroom w/private bath, $525 large bedroom, $450 small bedroom)
Note: All prices include $50 fixed cost for utilities. Subtract my monthly expenses + mortgage = $1750/month cash flow. Factoring in vacancies, the total generated cash flow was $35,450 over the course of those 21 months less the $31k in renovations = $144,450 Profit.
What made you interested in investing in this type of deal?
I decided to rent a room in a 6-bed house for $400/month when I first moved to Las Vegas. After living in the house for a couple of months, I couldn't help but calculate how much my landlord was making every month charging everyone $400-600 per month. I was disappointed that most of the multifamilies I saw on Zillow and Redfin were in rougher neighborhoods, so I knew I had to replicate this bedroom rental model.
How did you find this deal and how did you negotiate it?
I found it on Zillow after a price drop from $189,900 to $185,000 for a 7 Bed/5 Bath, 2426 sqft. house. I offered 170k, and they countered at 175k with 5k in closing costs to the buyer. The deal was done. It appraised for 186k during closing.
How did you finance this deal?
I purchased this property with a conventional loan with about 10k down (my entire savings) at 4.35% interest rate. My monthly PITI was $996/month.
How did you add value to the deal?
I ripped up the old laminate floors, a layer of carpet under that throughout the house, and linoleum flooring under that as well. I put down luxury vinyl planking throughout the house and 4-inch base, except for the kitchen and the converted garage that already had tile. I remodeled 3 of the 5 bathrooms but waited to do the master bathroom until I had enough money (where I was living). I also had the kitchen remodeled by one of my contractor referrals 8-9 months in, replaced the AC after a year.
What was the outcome?
I have signed a Lease Purchase Agreement with another local house hacker looking to do the same thing for $300,000 purchase price (60k down, 80k at refinance). So that leaves me $140k in equity at the time of purchase, $35,450 rental cash flow, less the $31k in renovations = $144,450 Profit. Since that house was my primary residence and will be recorded after 2 years of ownership, that 144k will not get hit with capital gains. I am receiving an additional $500 per month until refinance.
Lessons learned? Challenges?
Hire good contractors and always anticipate an additional 15-20% in expenses. I was essentially using the funds from my W-2 job to pay for the labor on the rehab and putting the materials on my credit card. I would have had more reserves saved.
The biggest challenge with the 7-bed house hack was sharing one kitchen. The maid came monthly to clean up, but the kitchen was constantly needed to be cleaned and at the end of the day. Setting proper expectations of cleanliness and noise was hard.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
My real estate agent (also my roommate at the time) always went the extra mile to help with the process. He was just as excited as me and actually moved into the house afterward! We put in 10 offers on different properties and finally got the 10th offer accepted.
