Successful House Hack but What Now?

Question

House Hack Breakdown (First Deal)

Type: SFH 2200 sqft

Bed/Bath: 4/2

Purchase Price: 337k with VA Loan

Out of Pocket Costs: 24k (downpayment, closing costs and minor cosmetic updates before renting out rooms)

PITI: $1750

PMI: $0 with VA

WSG: Variable

Electricity: Variable

Rents: $2050

On
 average the cash flow is between -$50 and $100 a month. Not great but I
 have significantly reduced my living expenses. I used to pay $1100 in 
rent and now I've only come out of pocket during the winter months when 
the heat is on. What I would have done differently was saved a 
bit more for a down payment if given the time. In my case, I was 
transferring from a different area and had little advance. Overall I am 
pleased with what I found as this Washington market is pretty expensive,
 every other 4 bedroom was $40-60k more expensive so this was a great 
find.

What's Next?

My goal is to 
achieve financial freedom through real estate investing specifically 
through Buy & Hold. I had only just learned about the power of real 
estate before purchasing the property above. I have read countless books
 on the topic but I seem to be suffering from analysis paralysis. I'm 
having a tough time deciding what move to make next now that I've used 
over half my savings purchasing this one property.

In search of advice.

Thanks in advance.

Stephen Barton · Answer

Sounds good @Tatiana Raid. My post has a few ideas. You are always welcome to message me for free and I will give you more tips than you would know what to do with. Lol!

Tatiana Raid · Answer

@Stephen Barton

Sorry for the late response.

Thanks for the advice! I am willing and able to get the ball rolling on whatever it is I need to do!

Stephen Barton · Answer

@Tatiana Raid I would highly suggest finding wholesalers or agents who are investors around you. Go to meetups and meet the deal makers in your area. That is where my wife and I found our current live-in flip. Deals are out there. You will just never see them on the market that often. I know, because I have done almost over 150 off market deals that never saw an MLS listing. They were all done through title companies and were just buyer to seller. No agents or anyone in between.

Even better- I would consider doing a marketing campaign for your next deal. Knock on some doors or send letters to the properties you might want to buy. Look for deferred maintenance on them. Look for tall weeds etc. Then you need to look up the tax records and see who owns them. You can do anything you put your mind to. Great job on your investing so far!

Tatiana Raid · Answer

@Jaysen Medhurst

Yeah, that's what the 2/1s go for in this area. Which is why I said I lack the resources to purchase this plex. It would be nice though.

Jaysen Medhurst · Answer

If you're interested in similar properties, @Tatiana Raid, I would look up the owners of all the other buildings in that complex, then reach out and see if they are interested in selling. Off-market is the way to go, if you can. $1200/unit might not cut it at a $550k price, though. That doesn't hit the 1% rule. Run your numbers and don't fudge just to make a deal look better.

As far as financing, my recommendation would be to either:

• Sell your current home and use your VA benefit (not sure what the limit is) towards a MFR, OR
• Sell your current home and use FHA or other low-down payment loan to purchase a MFR

Either way, I recommend that you sell the current SFH. It won't cash flow very well, if at all, and will be a pain to manage the separate tenants once you move out.

Tatiana Raid · Answer

@Jaysen Medhurst

I've been searching for a 2-4 unit in my area but to no avail especially without any extra funding. The area is a bit inflated.

I am pleased to know that you've searched as well with what you've linked.

The 4plex you've linked is asking for cash only, well at least that's what my realtor could glean from other sources. But neither of us could get into contact with the seller or agent listing the property to verify anything. It's a very weird situation, I've tried multiple times.

I really do want to buy it though, I could get 1200 per unit. But coming up with 550k....I'm not sure if I've gathered the proper resources/connections.

My main concern right now is what other strategies I could use in order to get the ball rolling.

Jaysen Medhurst · Answer

Hi, @Tatiana Raid, sounds like you put together a good house hack for yourself. No, you're not cash flowing, but even with a small amount out of your pocket each month, you're saving $1k/month. That's a 50% ROI on the money you put in. Just make sure your putting aside some money for CapEx and reserves (and your next deal!).

As far as next deals, I'd look for MFR properties that you can potentially house hack. A 3- or 4-unit property will be much more likely to actually cash flow, especially after you move out. Something like this maybe? I don't know your market at all. What do you think you can get for rent on a 2/1?

Successful House Hack but What Now?

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