House Hacking/First Property
Hello BP,
After a few years of "Analysis Paralysis", I finally have my first property under contract with a closing date in May. The house is a 3bd/2bth SFR (unit 1) with a separate 2bd/1bth house (unit 2) behind it on the same lot. Each property has its own address and separate gas and electric meters. The ideal plan would be to live in the smaller house out back while renting out the bigger one, but plan to purchase another property next while fully renting out this one. So the numbers below will assume it is a full on rental, since that is my final goal with this property. For now it will be my primary residence.
The Deal:
Purchase Price: $86,000
Financing: 30yr conventional loan
PITI (with PMI): $635/mo
Total Cash into deal: $7,380
Rent:
- Unit 1: $900
- Unit 2: $400
- Total: $1,300/mo
Total cash flow including non-cash expenses (vacancy, repairs, capex all at 7% gross rent) is $180 per month. I will also be able to add $50/mo. once my PMI drops off the loan = $230/mo.
Cash on Cash ROI: 26.06%
Even if I don't rent this property out and live in it with no tenants, I am already reducing my monthly rent payment that I have now by quite a lot.
Also, wanted to note that the main house is recently renovated with stainless steel appliances, granite countertops, custom bathrooms etc... A little too much for a rental in my opinion, but doesn't bother me any since the seller did all that before listing.
This would be my first ever deal...thoughts??
I love it, Joe! Sounds like an absolute win for you to be able to reduce your living costs so much! I'd kill for a purchase price like that in the Twin Cities! haha, but seriously, I don't see a downside for you on this. Are there tenants in place? If not, I'd say "good!" but, I'd love to know how it all goes once you close.
@Jesse Lynch Thanks! Yeah, I feel fortunate on this deal. It actually came on the market the exact day I had a bunch of properties lined up to go see. Because of the timing I was able to see it twice and put an offer in within 2 days of the listing. Very competitive out there!!
The seller has some other properties he is looking at selling only because he is living out of the area. I think I may try and work on a deal to acquire those as well to start my portfolio!
@Jesse Lynch also, no tenants in place. It was remodeled and then listed so both units vacant :)
@Joe A Warner - that seriously sounds like an awesome deal! I'd caution to take it a little bit slow in this COVID environment. That house hack sounds like a win, no matter what, but to take on several more, with the future of home prices might be more of a risk that it's worth at this strange moment in history. It's hard and even silly to predict the future of the market at any time, but there is a chance that values will drop a bit, allowing you to get more for your money in a short amount of time!
Glad you got past the analysis paralysis though, man! I'd say close on this one, get it occupied, and then look to your next deal!
@Joe A Warner Sounds like a great deal! Congrats on your first purchase.
@Joe A Warner way to take the leap. Everyone always says it is a bad time to invest. Investors that started in 2008 are doing pretty well (they have had renters pay half the mortgage payments already and rents increased during that time) it is always a good time to invest for long term (not always for flipping). You will do well, current conditions will change and you will still have a great property.
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Broker MN (#Boiler Special Engineer sp711180) and MN (#40480519)
- http://www.goniongroup.com
@Joe A Warner Congrats on moving out of the analysis paralysis phase and purchasing your first property! Sounds like a great deal with a solid plan. Thanks for sharing! I am actually looking into a SFR with a 2nd property for my next investment and it's great to know that it can happen.
@Amber Gonion Totally agree. As long as we are consistent with our investing, when it comes to property value it shouldn't really matter, your just buying at a discount. I am a cashflow investor so I am not terribly worried about property value as long as the cashflow is strong.
@Synthia B. It can happen!! I am so excited to begin my journey, I have many years of investing ahead and can't wait! Do you already have investment properties?
Originally posted by @Joe A Warner:@Synthia B. It can happen!! I am so excited to begin my journey, I have many years of investing ahead and can't wait! Do you already have investment properties?
Yes! We closed on our first investment duplex last month. It is cash-flow day 1, until the uncertainty of Covid. Thankfully we have great tenants who are communicative and transparent. We are looking to House-hack for the next investment with a property similar to yours.