All Forum Posts by: Mitch Ottoson

Hello BP! I am in the middle of reading Brandon Turner's "The Book on Investing in Real Estate with No (and Low) Money Down" and one of the loan options discussed is a streamline 203k. My wife and I are looking to purchase and house hack our first home and this loan option sounds perfect. I am wondering if anyone has experience using this type of loan and if there is anything that I should know or lessons learned from using this type of financing that anyone would like to share. Thanks!

Hello BP! I am hoping to get some advice on my first potential deal. I am looking at a duplex to house hack that has great upside potential. It is not quite move in and rental ready but it is close. The issue is that a flipper did all of the work himself and is unable to provide permits on the work he has done. I could move into the house today and make the situation work while getting the other unit ready to rent. My concern is that without having professionals come in and give me quotes during due diligence, I don't know I'm getting into. My question is, if I write an offer to get under contract, am I held to that price or am I able to negotiate based on my findings? I plan on writing serval contingencies to protect myself to get out of the deal if inspections don't go as hoped but in a competitive market, is there a risk in writing a full price offer to get under contract to learn more? Any advice is much appreciated!

@Hugh Ayles, thank you for sharing your experience! The property that I am looking at has mostly minor rehabbing that needs to be done. If you had to isolate just the cost of this repurpose, what would be your estimate to the cost?

Hi all! I am currently looking into converting a SFU home that is zoned for an MFU into a top-bottom duplex. One of the challenges is making sure that each until has access to laundry. The basement has the current laundry so we would be looking at repurposing a linen closet that is right next to the bathroom on the main floor. Has anyone done such a repurposing and if so, what was your experience like? 

@Jean Bolger I really appreciate your insight on the Denver market. It is very possible that a house hack is not the best strategy for what I am looking for. Given the market, it could make more sense to use the BRRRR (buy, rehab, rent, refi, repeat) strategy. As first time home buyers, my fiancé and I want a home for ourselves as well as an investment for the future in the same property.

@Matt M. Thank you for the additional context on financing the PMI. It was a concept that I heard in passing that I'd like to learn more about.

@Bill S.You have been incredibly helpful and would not misinterpret your help as being picked on :) my understanding of GRM is the rents are annualized so based on the current rents, 2,400x12x13.33= 383,904. There is definitely some room for forced appreciation in the home so if I could get 1,400 per unit, the list price makes more sense (2,800x12x13.33= 447,888). 1200 seemed to be low with 1400 as more of the average but I would rather invest on what is currently happening than what could be.

@Andy Robison the PMI was around $175/month but I heard in a podcast how that can be avoided by paying them upfront (possibly with seller credits if negotiated correctly)

@Bill S. I appreciate you taking the time to look at my numbers, this thread has really helped me to confirm my initial gut reaction to plugging these numbers into the BP calculator. After reading the post on using the rental property calculator, the recommendation was to not give up on a property but to find out what my price would be to make the deal work. When entering the numbers, the result was that the GRM was 13.33. In your experience, does this sound reasonable for a duplex in the Speer neighborhood?

Sorry in advance for the long post, want to make sure to take the time to write everyone back.

@Joshua D. like that 100:10:1 rule of thumb, I've never heard that before. Denver is a hot market and on top of that, I am being picky in choosing an area that I want to live based on crime rate, good school, and the opportunity for forced appreciation. It looks like the search will have to continue!

@Jean Bolger the home is zoned to be a legal duplex and the area is definitely a trendy one! It seems as though the up in coming neighborhoods are in north west Denver which is tough for me because I work in Lone Tree so I was very excited to find something south of downtown. The location is great but the cash flow is more important!

@Bill S. I would be happy to share some numbers and elaborate. My fiancé I and I are first time home buyers who have been pre approved for $350k. The duplex is listed for 450k so when I say it's a great deal, that is compared to SFHs in the area that are listed for anywhere from 275-315k for the same square footage. The mortgage on the duplex (based on the Zillow estimate) would be $2k with market rents of 1200 per unit (each is 1bed/1ba). The rent would cover the mortgage but using the 50% rule of estimating expenses, the property would cash flow a negative 300-400 a month after moving out. Granted, that is included PM expenses on a building that I plan to self manage while that is reasonable. 

Hello BP! I am currently running some numbers for my first deal, a house hack, in Denver, Colorado. I've found some great duplexes is areas that I want to live in as a young professional. The problem that I am running into is that with 3.5% down payment, I'm getting a great deal while living there but after I move out in a year or two, I could be dealing with negative cash flow. With some forced appreciation and a 20-25% down payment, this property would definitely meet my investing goals but this is my first home and I want to take advantage of the low down payment mortgage options. Any thoughts or input is much appreciated!

Hey @Alton Guyton, I've never done a house hack before but this is something that I am working towards now. In the research that I have done, in the deal analysis you run the numbers as if all of the units were rented by tenants. 

@Paul Strauss, @Thomas D. House hacking is a very legal strategy where an investor owner occupies a small multi family home, such as a 4-plex :)