$130,000 Profit from first House Hack
Case Study for Houshacking in Minneapolis, Minnesota:
Bought a duplex for 3.5% down on an FHA mortgage: $6370
Rehab said duplex: roughly $10,000. This consisted of carpet, laminate floors and paint in the lower unit, countertops, backsplash, appliances, tile in bathroom floor and shower surround.
Also paid for was furniture for two Airbnb rooms, roughly $1600.
Lucky for me we had a hail storm and I was able to get the siding replaced for $1200 deductible.
PITI: $1230
Water, sewer, trash: $150
Internet: $90
Gas: $80-100
Electric: $70
Rent from upstairs unit: $1100
Rent from roommate in lower unit: $450
Rent from Airbnb room in lower unit: $600
My rents were low for Northeast Minneapolis because of the condition of the exterior of the home when I rented it and giving my roommate a great deal. Should have been $1200 and $600 for room.
Gross rent: $2150
Expenses: $1640
Profit: $500 a month + free rent (savings of $1250 per month)
$6000 profit per year, $15,000 savings per year = $21,000 extra in disposable income per year.
Initial purchase price of $182,000
Sales price of $326,000
After realtor fees and closing costs a profit of $129,000. I didn't take a commission of course so add about $9k to this for everyone else.
During the almost two years of owning the place I was able to live for free, learn how to be a landlord, buy a 6 plex in Louisville, KY and travel quite a bit more than I had in the past. If I wasn't in town I just rented out the room that I stayed in on Airbnb, which covered a chunk of travel expense.
I have two more 6 plexes under contract in Louisville and will be using the proceeds from this plus savings to purchase those through a 5/25 commercial loan with US Bank.
This strategy is so simple and even if you can't make it work in your market where you live absolutely for "free" you can still have many benefits such as loan paydown, depreciation for tax purposes, appreciation, landlord experience and a reduced living expense.
Was what I did always comfortable? No. Not at all.
Am I going to do it again and for as long as I can? Hell yes.
