{"id":87183,"date":"2019-11-04T17:00:04","date_gmt":"2019-11-05T00:00:04","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=87183"},"modified":"2024-02-19T14:13:23","modified_gmt":"2024-02-19T21:13:23","slug":"newbie-house-hack-duplex","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/newbie-house-hack-duplex","title":{"rendered":"Meet Tim: How One Investor House Hacked a Duplex With No Prior Experience"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC2306370494\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n<p>What would life be like with no rent? No mortgage payment?<\/p>\n<p>Pretty good, as it turns out.<\/p>\n<p>Nowadays, <a href=\"http:\/\/money.cnn.com\/2016\/06\/22\/real_estate\/rent-affordability-housing-harvard\/\" target=\"_blank\" rel=\"noopener noreferrer\">11 million Americans spend half their income on rent<\/a>, and that doesn\u2019t include the millions of homeowners similarly overstretched.<\/p>\n<p>But for anyone looking to find a different path, <a href=\"https:\/\/www.biggerpockets.com\/real-estate-investing\/house-hacking-strategy\" target=\"_blank\" rel=\"noopener\">house hacking<\/a> 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.<\/p>\n<h2>Meet Tim<\/h2>\n<p>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.<\/p>\n<p>So he did something about it.<\/p>\n<p>Tim had no prior real estate investing experience\u2014and no experience renovating homes, either. But the more he researched house hacking, the more confident he became that he could do it.<\/p>\n<p>He started looking for small multi-unit properties in middle-class neighborhoods around town. Eventually, he settled on Forest View.<\/p>\n<h2>The Neighborhood<\/h2>\n<p>Forest View is a quiet neighborhood near Michigan State University. It\u2019s a neighborhood of classic suburban cul-de-sacs, with minimal traffic. Kids play outside during the day.<\/p>\n<p>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.<\/p>\n<p>Tim went on to explain: \u201cWe 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\u2019s new head trainer! They didn\u2019t rent from us, but I knew I had a solid location because of that.\u201d<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-86520\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/02\/invest-remotely.jpg\" alt=\"\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/02\/invest-remotely.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/02\/invest-remotely-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><br \/><em><br \/><strong>Related:<\/strong> <a href=\"\/renewsblog\/2016\/02\/21\/tax-implications-house-hacking\/\" target=\"_blank\" rel=\"noopener noreferrer\">The Tax Implications You MUST Understand Before House Hacking<\/a><\/em><\/p>\n<h2>The Property<\/h2>\n<p>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.<\/p>\n<p>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.<\/p>\n<p>So, how did Tim find this gem of a property?<\/p>\n<p>For anyone who thinks <a href=\"https:\/\/www.biggerpockets.com\/blog\/2014\/04\/09\/direct-mail\/\" target=\"_blank\" rel=\"noopener noreferrer\">direct mail<\/a> is dead, hold your horses\u2014Tim sent a good ol\u2019 fashioned handwritten letter to the owner. Turns out the owner was ready to sell and called him back.<\/p>\n<h2>The Numbers: Acquisition &amp; Updates<\/h2>\n<p>Tim bought his duplex for $119,500, financed through an <a href=\"https:\/\/www.biggerpockets.com\/blog\/fha-guidelines\/\" target=\"_blank\" rel=\"noopener noreferrer\">FHA loan<\/a> with their skinny 3.5 percent down payment.<\/p>\n<p>The seller also contributed $4,500 toward closing costs, $1,000 toward a new hot water tank, plus money to cover an extra month\u2019s rent for one of the tenants. (\u201cThe other unit\u2019s tenant was rented to his ex-step son.&#8221;) Tim gave him notice to vacate, and he stayed the extra month prepaid by the seller.<\/p>\n<p>One of the units needed some work. The prior tenants of six years had smoked and were \u201cnot clean people.\u201d<\/p>\n<p>Total cost of renovations: $17,000 for updated flooring, windows, deck, cabinets, paint, central air, hot water tank, countertops, and appliances.<\/p>\n<p>If that sounds like a lot of work and not a lot money, well, Tim put in plenty of sweat equity himself. \u201cBear in mind that I completed most of the work myself, save the A\/C, hot water, windows, and deck. I had not previously done <em>any<\/em> flooring, good painting, trim work in my life. I\u2019m a d@*n good painter now!\u201d<\/p>\n<p>Oh, and the other cost in that $17,000? Tools. Tim didn&#8217;t have any since he&#8217;d never done this kind of work before.<\/p>\n<p>How did Tim pay for all this?<\/p>\n<p>\u201cRepair 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.\u201d<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-87692 size-main-slider\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2014\/12\/painting-702x336.jpg\" alt=\"\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2014\/12\/painting-702x336.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2014\/12\/painting-300x144.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2014\/12\/painting-768x368.jpg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2014\/12\/painting.jpg 940w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h2>The Numbers: Monthly Cash Flow<\/h2>\n<p>Tim\u2019s 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).<\/p>\n<p>But his interest rate was a lean 3.75 percent; not too shabby!<\/p>\n<p>And the rent? \u201cThe resident pays $1,140\u2014pet rent is part of this. I provide lawn care and trash\/recycling. They pay all their own utilities.\u201d<\/p>\n<p>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.<\/p>\n<h2>Has Anything Gone Wrong, or Is This a Fairy Tale?<\/h2>\n<p>\u201cThe cabinets and countertops didn\u2019t 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.\u201d<\/p>\n<p>Fair enough. After all, Tim was not a contractor and had almost no experience in home repair.<\/p>\n<p>The story turns grimmer when it came to permits and inspectors. \u201cI didn\u2019t pull a permit for the deck when we built it. During my city rental inspection, they said I need to pull one. It\u2019s 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\u2019m hoping to finally have this wrapped up in the next few weeks.\u201d<\/p>\n<p>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.<\/p>\n<p>What about trouble with the renter?<\/p>\n<p>Tim said he\u2019d been lucky so far. \u201cNo major issues. Just small things\u2014I like to play music when I get home from work while I\u2019m doing things, and they have an 18-month-old. I wait until they are up from their nap at around 5:15.<\/p>\n<p>\u201cI don\u2019t play it ridiculously loud, but I pay attention to that for them.\u201d<\/p>\n<p>Sounds pretty hunky dory to me.<\/p>\n<h2>Tim\u2019s Advice<\/h2>\n<p>I asked Tim what advice he had for other people looking to model his success with <a href=\"https:\/\/www.biggerpockets.com\/guides\/buy-duplex\" target=\"_blank\" rel=\"noopener\">house hacking a duplex<\/a>.<\/p>\n<p>\u201cKnow your numbers! Even though I underwrote for $950 rent and am getting more than that, there are still costs that I didn\u2019t factor in at that time that I have had to do, such as gutters and insulation.<\/p>\n<p>\u201cAlso don\u2019t be afraid of living next door to your residents. It\u2019s 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!<\/p>\n<p>\u201cThat being said, if you have to enforce your lease\u2019s rules\u2014do so! You are running a business!\u201d<br \/><em><br \/><strong>Related:<\/strong> <a href=\"\/renewsblog\/2014\/11\/20\/a-new-way-to-look-at-the-concept-of-house-hacking\/\" target=\"_blank\" rel=\"noopener noreferrer\">A New Way to Look at the Concept of \u201cHouse Hacking\u201d<\/a><\/em><\/p>\n<h2>Is House Hacking for You?<\/h2>\n<p>Not having a mortgage payment sure is nice. You could put your entire housing payment toward investing and creating passive income!<\/p>\n<p>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.<\/p>\n<p>And city permit offices and inspectors? Bureaucratic red tape and threats of fines over a small wooden patio? Pure misery and endless frustration.<\/p>\n<p>There\u2019s also the close proximity to your <a href=\"https:\/\/www.biggerpockets.com\/blog\/2013\/01\/27\/tenant-screening\/\" target=\"_blank\" rel=\"noopener noreferrer\">tenants<\/a>. You have both a business relationship as landlord and tenant and a personal relationship as neighbors. It can work well, like in Tim\u2019s case, but it means choosing renters with extra care.<\/p>\n<p>I asked Tim: Any final words of advice?<\/p>\n<p>\u201cDon\u2019t talk about it; be about it! You can only talk about investing in real estate for so long before you need to take action!\u201d<\/p>\n<p>Amen.<\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/real-estate-investment-calculator?utm_source=renewsblog\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91220\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-02.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-02.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-02-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><em>Ever pursued house hacking? Any experiences to share? Horror stories? <\/em><\/p>\n<p><strong>We love a good story! Share it below.<\/strong><\/p>","protected":false},"excerpt":{"rendered":"<p>Tim had no investing experience\u2014and no experience renovating homes. But the more he researched house hacking, the more confident he was that he could do it. Here&#8217;s his success story. <\/p>\n","protected":false},"author":158586,"featured_media":117190,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7119,7356],"tags":[],"class_list":["post-87183","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-biggerpockets-daily","category-house-hacking"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/87183","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/158586"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=87183"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/87183\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/117190"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=87183"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=87183"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=87183"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}