Let me first start off by saying, I have been looking forward to making this post for a very long time and I am ecstatic to be at this point!! I'd like to give a shout out to BiggerPockets, specifically @Brandon Turner & @David Greene for hosting the BP podcast, for writing books such as The Book on Rental Property Investing & The Book on Managing Rental Properties which have provided me with endless amounts of information that has helped me get to this point, and to the BP community members that I have met that helped that make this deal possible.
Before I get into the actual deal itself I want to introduce myself and give a brief background of my journey into real estate. I always knew that I wanted to be an entrepreneur in my life and never had a disposition or desire to work for anyone else & make hem rich when I could be doing that for myself. I began researching and reading about real estate in January of 2017 as a senior in college. During school I was studying civil engineering so I never had the time to read/research real estate investing as much as I would've liked. So I made a plan to finish my last semester of school in December 2017, start work as a civil engineer in January 2018 and also dive into real estate investing this year. As a 22 year old fresh college graduate I'd say so far so good!
After listening to hundreds of BP podcasts and listening to what everyone said about house-hacking I knew that would be my gateway into real estate investing. I had been paying $1,200 in rent every month at my apartment while also being able to save 50% of my earned income, so I knew if I could eliminate my rent payment that I could start saving over 75% of my income. Which would allow me to begin investing more aggressively and on bigger properties. After about a month of searching from May - June and offering on multiple properties, my agent @Tanya Lechner (whom I found through another BP member ... she is great! BEST agent in San Antonio, TX) and I found a turnkey 3 bed / 2 bath single-family house built in 1978 with a garage converted into a studio apartment for me to live in and rent the main house (studio apartment has a kitchen, living room, bedroom, bathroom, & walk-in closet, it's own front door, and is completely separate from the main house). It was listed at $159,900. We offered $150,000 to which they countered at $158,500 in addition to a brand new roof, which I took! With an FHA loan @ 3.5% down this was going to be a great deal! Now this is the part where things got interesting. Originally we were supposed to close on June 29th but we didn't close until August 31st....I think it's worthy to note that during this time I was also able to locate, offer, and close on another single family house in Houston with my partners, so technically speaking that would be my first property... But back to the house hack ... apparently the sellers were trying to 1031 exchange the property but their CPA wasn't any good, so they fired him in late July and had to start the process all over. (TBH I'm not really sure what happened, and I don't really care at this point haha). My plan was to get the property rented out before kids started going back to school on the week of August 27th. But I also did want to upgrade a few things just because of my personal preference. So the owners allowed me to do a lease-back to get into the property before closing. During this time I installed brand new laminate flooring in the living room and kitchen, painted the kitchen cabinets, and installed brand new tile-look flooring in the bathroom, repainted a bedroom, installed new baseboards, and a number of miscellaneous items (pictures below). The rehab was about $5,000 & took me about 6 weeks to complete because I did a majority of the work on my own. I think it's safe to say I became a YouTube certified contractor haha. Originally I had locked my rate at 5.00%, which I was happy to get because the numbers worked well there. But I ended up meeting a mortgage broker that said he could get me 4.1% (which he was in fact able to). This forced the original lender to be more competitive, so he was able to lock me in at 3.75% because of a first time home buyer program that was recently introduced (This is when I realized the greatest negotiation tool is leverage and competition). This rate equates to a savings of over $120 per month from the 5.00% rate! So it ended up being very beneficial to not close until the end of August because I was able to complete my rehab without making a mortgage payment, drop my rate 1.25%, and get additional necessary repairs that I noticed during my rehab paid for by the seller! WIN WIN WIN....As for the metrics, the PITI payment is $1,220 and I anticipate to rent it out between $1350-$1450. So if things go as planned I will stand to cash flow at least $130 per month, which I will put towards variable expenses...the goal was to live for free, anything else is just icing on the cake! (Also, when I move out next year and find another one to house hack, the studio apartment will rent for at least $700, which will all be cash flow because the mortgage expenses and variable expenses will be paid for by the main house). As of now I am trying to get the property rented using Zillow Rental Manager (which posts ads to Zillow, Trulia, & Hotpads), Facebook posts, and Craigslist. I know I will get it rented before September ends though!
This entire experience has been a great , besides the frustrations which ultimately ended up as positives. I have learned a lot which has left me excited for what's to come in 2019 and the future! As to paraphrase what Scott Trench says, house hacking is one simple thing that someone can do that can completely change their entire financial future (even if they don't invest in real estate)... Now for me, the goal is exponential growth and to continue to acquire single-family & multi-family rental properties and ultimately begin to syndicate into larger apartment complexes.
