$130,000 Profit from first House Hack

56 Replies

jordan, you beat me at my first year.

i sold my first only rental a single wide trailer on own land feb 2017 which only paid loan earned $ 7k, profit on depreciating asset, all while living down street in foreclosure i bought earlier, zero down, since it had 2 "homes" on 15 acres  i had it surveyed with new deed and subdivided  the 3 acre back lot camp barns, then went credit union put debt consolidation note on camp since owned outright, no appraisal or inspection needed,  cleared ratios to refinance the bigger nicer one home, used that money cash out to help me buy a 3 unit, financed fix up money, then moved into 3 unit, rented primary home, rented 2 other units, then with 3 rental units income qualified just bought 3 b1 b house to rinse and repeat now in process to refinance my fixed up 3 unit. now i just incorporated after joining bp, thats all in last 15 months. 

now if i can get enough cash out refi on my 3 unit im praying for good appraisals to buy reo down street to rinse rehab and repeat and im still not sure im doing it right. im still using banks or credit unions. love find investor to simplify process and reduce paperwork.

i tried listing my camp on air bnb but no one wants rent off grid river front home. lol.

now got hire crew and management.  hard find good contractors with time, interest and experience. 

@Bruce Runn thanks!

@Nathan Platter working on it! I need to close these next two and then I'll start looking for another house hack.

@Andrew Assman thanks!

@Kelsey Bakka I know you can! Where will you be moving back to?

@David Leasure what do you need clarification on?

@Korie Apgar thanks!

@Marc V Palmeri thanks!

@Jonathan Klunk I don't know much about STR in Louisville. This was in Minneapolis! I thought they were only illegal in parts of Louisville?

please explain this in detail and very particular.....

"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."

Originally posted by @Jordan Moorhead :

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.

$6500 + 3.5% down right?
Weird. Also Im getting a PITI estimate of $1350/month on 190k purchase price. Im being quoted a pretty high MIP it looks.
Not sure I can cash flow, maybe rehab and sell.


Originally posted by @Jordan Moorhead :

@Kristopher Allen thanks! I'll start looking for another soon!

@Jeremy A. that's awesome! Sounds like you're making it happen man. Keep it  up!

@Craig Murray it was around $6500

@Patricia Maxwell you're welcome!

Justin - I will be moving back to Michigan (my home state), Auburn Hills area to be exact... I feel like the market is at the peak right now with prices increasing everyday, but I'm keeping an eye out and learning all that I can about real estate investing and house-hacking before I return.

Originally posted by @Jordan Moorhead :

@Bruce Runn thanks!

@Nathan Platter working on it! I need to close these next two and then I'll start looking for another house hack.

@Andrew Assman thanks!

@Kelsey Bakka I know you can! Where will you be moving back to?

@David Leasure what do you need clarification on?

@Korie Apgar thanks!

@Marc V Palmeri thanks!

@Jonathan Klunk I don't know much about STR in Louisville. This was in Minneapolis! I thought they were only illegal in parts of Louisville?

 My apologies. What I was replying to in the article stated, "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."

@Jordan Moorhead  

Salute to you. I am doing the exact same thing with my 4 plex. 

There are a few things that I am learning along the process. 

If you have 6 plex, you wont be able to claim homestead for the entire property which is a big deal in my area given property tax is high. 

@Bruce Runn

Please explain in detail what you meant by "stacked your renovations" to achieve lower tax brackets.  That would be good to know.  Thanks

This is a great post. I do have a question that probably requires a post itself - when does it make more sense to hold this property and let the renters pay off your mortgage while you continue to rake in cashflow and your property continues to appreciate, versus selling for a few $100K profit? I’m in this situation - could sell my duplex for about a $300K profit or continue to collect $2500/month cashflow. Thoughts? Thanks!

Michael John   For this one, I believe the goal is to acquire additional properties that would cashflow more than what he currently was getting. He'll turn around and use that profit for downpayment for additional acquisitions

@Jeremy A. I'm using the profit from the sale of this home to buy two 6 unit apartment buildings. The loan is a 25 year amortization loan with a 5 year balloon.

@Craig Murray no the 3.5% was that number!

Account Closed I'm unsure what you're  referring to? This breakdown was for the sale of the property and those were actual numbers that I pulled in while owning it. In those numbers repairs and updates were accounted for. Vacancy was low because I lived there and was able to control well!

What about MIP and other closing costs?

Originally posted by @Jordan Moorhead :

@Jeremy A. I'm using the profit from the sale of this home to buy two 6 unit apartment buildings. The loan is a 25 year amortization loan with a 5 year balloon.

@Craig Murray no the 3.5% was that number!

Account Closed I'm unsure what you're  referring to? This breakdown was for the sale of the property and those were actual numbers that I pulled in while owning it. In those numbers repairs and updates were accounted for. Vacancy was low because I lived there and was able to control well!

that is amazing, nice work. More so for the fact that you can find a duplex for that kind of price. The lowest i could find a duplex around my area would probably be 650k and that would require another 80k to get it up to standard. 

@Michael John what you should consider is “can I turn $300k around into a more profitable property that will generate more than $2500/month”

300k allows you to put 20% down on a $1.5M property. So maybe consider a 1031 tax exchange to avoid paying taxes on the sale and look into purchasing a small to medium sized apartment complex that will bring in more cashflow

Ex: A 30 unit complex ($50k per unit) with average rent of 600-800 (random, but common) would GROSS $18,000-$24,000 monthly..... so I know this is just a very generic example but it gives you the idea..... obviously a lot of other variables to consider when analyzing a multi family deals 

@Rodney Sums

I am always in a buy mode when the right deal is available. 3 years ago, I could only find 3 deals, 2 years ago I found 3 deals in April and none for the rest of the year, last year I bought 7 properties. I then either empty them (most are bought with the property empty to start) for a full renovation or in case of "stacking" like last year I do enough reno to rent them profitably for a year and hold them off so I'm staging my renovations to use my crew on a constant basis. If I do the reno right away, I rent them for a year or two and then sell them off typically off market since I have quite a number of people who know me via bigger pockets and are looking for turn key properties. In all cases, they are held for a year and a day minimum. I spread sales out to limit how many report LTG income in a year to keep my long term gains income under the lower tax rate cap so in the end, it's a stream of work and income that evens everything out. I already have a good number of rentals so holding a couple for 1-2 years really doesn't make any extra work while I season them and stage their sales to minimize the tax implication. I keep the ones that are the highest performers and sell off anything under my ROI/cash on cash return on my all in investment. I use a combination of HELOC/construction loans to roll everything until sales and get extensions to the loans if I'm holding them longer than a year.

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