Landlording & Rental Properties

Meet Tim: How One Investor House Hacked a Duplex With No Prior Experience

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
139 Articles Written
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What would life be like with no rent? No mortgage payment?

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Pretty good, as it turns out.

Nowadays, 11 million Americans spend half their income on rent, and that doesn’t include the millions of homeowners similarly overstretched.

But for anyone looking to find a different path, house hacking comes with plenty of perks. For this story, I tracked down a bona fide house hacker and pried until he agreed to spill the proverbial beans on exactly how he did it.

Meet Tim

At the time of the interview, Tim Puffer was a 27-year-old insurance underwriter living in East Lansing, Mich. He woke up one day sick and tired of paying for housing.

So he did something about it.

Tim had no prior real estate investing experience—and no experience renovating homes, either. But the more he researched house hacking, the more confident he became that he could do it.

He started looking for small multi-unit properties in middle-class neighborhoods around town. Eventually, he settled on Forest View.

The Neighborhood

Forest View is a quiet neighborhood near Michigan State University. It’s a neighborhood of classic suburban cul-de-sacs, with minimal traffic. Kids play outside during the day.

When Tim was looking, the area consisted of $90,000 to $150,000 single family homes, well-maintained condos, and a clean, middle-income apartment community with about 100 units.

Tim went on to explain: “We are about a two-minute drive from the Michigan State University campus and the campus golf courses. We actually had a few MSU professors look at the unit to rent and MSU basketball’s new head trainer! They didn’t rent from us, but I knew I had a solid location because of that.”

Related: The Tax Implications You MUST Understand Before House Hacking

The Property

Tim bought a bi-level duplex, with each unit boasting three bedrooms, one and a half bathrooms, about 1,400 square feet of living space, and a one-car garage.

The lower level on both sides has a walkout to a small wooden patio, which overlooks about a half-acre total and is almost completely enclosed by trees from the neighbors.

So, how did Tim find this gem of a property?

For anyone who thinks direct mail is dead, hold your horses—Tim sent a good ol’ fashioned handwritten letter to the owner. Turns out the owner was ready to sell and called him back.

The Numbers: Acquisition & Updates

Tim bought his duplex for $119,500, financed through an FHA loan with their skinny 3.5 percent down payment.

The seller also contributed $4,500 toward closing costs, $1,000 toward a new hot water tank, plus money to cover an extra month's rent for one of the tenants. ("The other unit's tenant was rented to his ex-step son.") Tim gave him notice to vacate, and he stayed the extra month prepaid by the seller.

One of the units needed some work. The prior tenants of six years had smoked and were “not clean people.”

Total cost of renovations: $17,000 for updated flooring, windows, deck, cabinets, paint, central air, hot water tank, countertops, and appliances.

If that sounds like a lot of work and not a lot money, well, Tim put in plenty of sweat equity himself. "Bear in mind that I completed most of the work myself, save the A/C, hot water, windows, and deck. I had not previously done any flooring, good painting, trim work in my life. I’m a [email protected]*n good painter now!”

Oh, and the other cost in that $17,000? Tools. Tim didn’t have any since he’d never done this kind of work before.

How did Tim pay for all this?

"Repair costs were financed via cash, credit card, and re-financing vehicles to pull cash out. I have since gotten a HELOC on the building and paid off that vehicle and the credit cards. The building appraised for $162,500 after repairs."

The Numbers: Monthly Cash Flow

Tim’s mortgage payment (principal, interest, taxes and insurance) ended up being $951. That included an FHA mortgage insurance premium of $81/month (which, unfortunately for Tim, will never go away).

But his interest rate was a lean 3.75 percent; not too shabby!

And the rent? “The resident pays $1,140—pet rent is part of this. I provide lawn care and trash/recycling. They pay all their own utilities.”

That left Tim an extra $189/month to cover maintenance, repairs, and the odd vacancy, all before he ever had to pay a dime toward his own housing.

Has Anything Gone Wrong, or Is This a Fairy Tale?

“The cabinets and countertops didn’t go as planned. We purchased the countertops before the cabinets, and the cabinets ended up being slightly smaller. We had to purchase a new countertop and eat the cost.”

Fair enough. After all, Tim was not a contractor and had almost no experience in home repair.

The story turns grimmer when it came to permits and inspectors. "I didn't pull a permit for the deck when we built it. During my city rental inspection, they said I need to pull one. It's taken me about a month to find a contractor willing to put the permit in his name, do the site plan drawings, and take on anything needed to appease the rental inspectors. I'm hoping to finally have this wrapped up in the next few weeks."

City permit offices are a nightmare at the best of times. When you miss a step and do work without a permit, prepare for the wrath of local bureaucracies to rain legal hassles, paperwork, fines, fire, and brimstone down upon thee.

What about trouble with the renter?

Tim said he’d been lucky so far. “No major issues. Just small things—I like to play music when I get home from work while I’m doing things, and they have an 18-month-old. I wait until they are up from their nap at around 5:15.

“I don’t play it ridiculously loud, but I pay attention to that for them.”

Sounds pretty hunky dory to me.

Tim’s Advice

I asked Tim what advice he had for other people looking to model his success with house hacking a duplex.

“Know your numbers! Even though I underwrote for $950 rent and am getting more than that, there are still costs that I didn’t factor in at that time that I have had to do, such as gutters and insulation.

"Also don't be afraid of living next door to your residents. It's really not a big hassle at all. Ideally, you should try to choose a resident with whom you can be friendly, because you will see them quite often and have quite a few conversations outside of landlord/business talk. You may even share a bonfire or two together!

"That being said, if you have to enforce your lease's rules—do so! You are running a business!"

Related: A New Way to Look at the Concept of “House Hacking”

Is House Hacking for You?

Not having a mortgage payment sure is nice. You could put your entire housing payment toward investing and creating passive income!

Still, it comes with its own price. Tim did much of the renovation work himself, learning as he went along. He spent his weekends working while his friends were out having fun.

And city permit offices and inspectors? Bureaucratic red tape and threats of fines over a small wooden patio? Pure misery and endless frustration.

There’s also the close proximity to your tenants. You have both a business relationship as landlord and tenant and a personal relationship as neighbors. It can work well, like in Tim’s case, but it means choosing renters with extra care.

I asked Tim: Any final words of advice?

“Don’t talk about it; be about it! You can only talk about investing in real estate for so long before you need to take action!”


Ever pursued house hacking? Any experiences to share? Horror stories?

We love a good story! Share it below.

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their ...
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    Eliseo Medrano
    Replied about 3 years ago
    TIm, thanks for the blog post! Fixing to get this guy a try out!
    Cayla Farley from Shawano, Wisconsin
    Replied about 3 years ago
    So what would be his next steps?? We are in this situation as well. Low down payment of 5% because we are owner occupying. But now we want to refinance to a conventional loan and buy another property using FHA but can’t, because our LTV is 95% and a conventional loans LTV is 75%, so where does the extra 20% needed come from? Just save up cash flow? On a duplex that would take years….so what’s next….?
    G. Brian Davis from Baltimore, MD
    Replied about 3 years ago
    Hi Cayla, if you’re moving into a new multifamily, you can always get a conventional owner-occupied loan for the new property and leave your FHA loan in place for now on the old duplex. Not an ideal long-term solution but it could work for now. If you want to grow your portfolio, doing it by moving into each new property is a pretty slow strategy though.
    Allen Berrebbi
    Replied 12 days ago
    Do you have a link on the RI programs
    Daina Estime from Boston, Massachusetts
    Replied almost 3 years ago
    This is my story! The state of RI has a program that pays closing costs of up to 7.5k so I had the opportunity to buy a duplex with no money down in a really nice city.
    Chaz T Johnson
    Replied about 2 years ago
    Very cool article. Thanks for sharing.
    G. Brian Davis from Baltimore, MD
    Replied about 2 years ago
    Thanks for reading Chaz!
    Don Taylor New to Real Estate from Raleigh, NC
    Replied over 1 year ago
    Definitely gained some knowledge on this one
    Xiu Jin Chen
    Replied about 1 year ago
    Great article! Very inspiring! We are planing to do the same but don’t know where to find duplex properties. How could you find duplex and send direct mail to the owner? Very much appreciate the help!
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    Thanks Xiu Jin! They're more common in some markets than others. But on platforms like Zillow you can set up email alerts when new multifamily properties come on the market. You can also buy them off-market through tactics like driving for dollars or wholesalers. Best of luck!
    Xiu Jin Chen
    Replied about 1 year ago
    Thank you very much for your advice Brian!!
    Edwin Flores Investor from San Diego
    Replied 6 months ago
    Thank you for sharing this story and most importantly thank you for sharing your knowledge, tools and expertise.