My "House Hacking" Story

11 Replies

This is my house hacking story that will go into a little depth of how I got into real estate, live debt free, and show some rough numbers of my property. This is my first “blog/forum” and will help me achieve my goal of sharing more experiences and information through blogging. Hope you enjoy!

Roughly two years ago I purchased my first 4-unit using a FHA first-time home buyers loan for 3.5% down and a low interest rate. The purchase price was 140,000 and I was able to finance the closing costs to make my total out of pocket investment around $5,500 after inspections, fees, and down payment. I moved into a one bedroom apartment that required some TLC and updating, the other three units were in turn-key condition. I did the work on the one bedroom myself while living there and racked up a construction bill of $3,000.

Total Out of Pocket Expenses: $8,500

The PiTi (principle, interest, taxes, insurance) plus MIP is around $1150. The average cost of expenses for this property over the last two years has been $490 a month.

Total Monthly Expenses: $1640

The three remaining units rented out for an average of $2100 a month over the last two years. (Had two one week turnover so vacancy was not factored in). This gave me an average cash flow of $460 a month. Over two years this piled up in my bank account and is now at $9,900 (includes some random vendors not included in the monthly expenses)

I recently got the building appraised at $190,000! Subtract my mortgage which is at 140,000 (only have paid off the financed closing costs it looks like) for a total equity of $50,000!

So over the last two years I have earn my initial investment of $8,500 back, earned an extra $1,400, built up equity of $50,000, and lived rent free all off one property!

For anyone that doesn't currently own property and can qualify for the FHA loan, I strongly recommend jumping into real estate this way. I have zero regrets on my first property because it has allowed me to continue investing in real estate by creating a "live free" environment.

Thanks for reading and I hope this story helps someone!

This is a great story. Thanks for sharing. It reminds me of when I didn't pull the trigger on 4-unit REO in a depressed SoCal market and I was using FHA. There were 5 of these properties that came on to the market (between $300-350K) and I overlooked the deals because I was pre-occupied on my other projects, my significant other wasn't too fond living with tenants, and I had to tack on an extra 30 mins to my commute.

What was so interesting about the deal was that I only had to put $20K down and could've lived for free and have extra cash in my pocket every month from cash flow. 

I regret it now, because I drove the neighborhood and saw the properties were cleaned up. It got me curious, so I pulled out my Redfin app and saw one of the properties recently sold for $800K! That's more than double the equity and also rents have risen substantially since then. 

Good job on taking action! Good luck with your next deal!

Originally posted by @Greg Szymbor :

This is my house hacking story that will go into a little depth of how I got into real estate, live debt free, and show some rough numbers of my property. This is my first “blog/forum” and will help me achieve my goal of sharing more experiences and information through blogging. Hope you enjoy!

Roughly two years ago I purchased my first 4-unit using a FHA first-time home buyers loan for 3.5% down and a low interest rate. The purchase price was 140,000 and I was able to finance the closing costs to make my total out of pocket investment around $5,500 after inspections, fees, and down payment. I moved into a one bedroom apartment that required some TLC and updating, the other three units were in turn-key condition. I did the work on the one bedroom myself while living there and racked up a construction bill of $3,000.

Total Out of Pocket Expenses: $8,500

The PiTi (principle, interest, taxes, insurance) plus MIP is around $1150. The average cost of expenses for this property over the last two years has been $490 a month.

Total Monthly Expenses: $1640

The three remaining units rented out for an average of $2100 a month over the last two years. (Had two one week turnover so vacancy was not factored in). This gave me an average cash flow of $460 a month. Over two years this piled up in my bank account and is now at $9,900 (includes some random vendors not included in the monthly expenses)

I recently got the building appraised at $190,000! Subtract my mortgage which is at 140,000 (only have paid off the financed closing costs it looks like) for a total equity of $50,000!

So over the last two years I have earn my initial investment of $8,500 back, earned an extra $1,400, built up equity of $50,000, and lived rent free all off one property!

For anyone that doesn't currently own property and can qualify for the FHA loan, I strongly recommend jumping into real estate this way. I have zero regrets on my first property because it has allowed me to continue investing in real estate by creating a "live free" environment.

Thanks for reading and I hope this story helps someone!

Congrats Greg, 

I'm doing the same thing and can't recommend it highly enough! Great story, thanks for sharing. 

This is my goal.  Actually almost verbatim what I want to do.  Congrats on the success in your first Real Estate Deal. The fact you had to do no work on 3 out of 4 units is great.  

How did you find the property? What things should I think about now about a year away from the purchase? What things would you say most do not think about when dealing with the FHA and closing on a deal with the red tape involved?

Once again Congrats!

@Greg Szymbor Congratulations! I hope to do something similar soon. You really dove in purchasing a fourplex. I'm a bit intimidated at the thought of bad tenants, but I think proper screening will put me at ease eventually. I have a few questions, to you and anyone who'd like to comment. What's a good interest rate range to be in for loans? Where you able to get the loan based off of projected cash flow estimates? What was the negotiating factor that lowered the purchase price, something the inspector found or the obviously at one place needing repairs? Thanks for sharing your story!

Originally posted by @Amber Koontz :

@Greg Szymbor Congratulations! I hope to do something similar soon. You really dove in purchasing a fourplex. I'm a bit intimidated at the thought of bad tenants, but I think proper screening will put me at ease eventually. I have a few questions, to you and anyone who'd like to comment. What's a good interest rate range to be in for loans? Where you able to get the loan based off of projected cash flow estimates? What was the negotiating factor that lowered the purchase price, something the inspector found or the obviously at one place needing repairs? Thanks for sharing your story!

For the conventional loans I currently buy multi-families with I generally get anywhere from 4-5% interest rate depending on where the index is. My FHA loan is right around 3%.

As fair as getting those loans...my FHA loan was based off of my income/credit. The conventional or "investment" loans where you buy a property for the sole purpose of renting it out is based off of income/expenses of that property.

I low ball every offer for EVERY reason. I don't care if the place is perfect, I will find something that I don't like about it or that will make it "tough" to rent. I'll never tell the other agent that I like a place, just always down talking the property and nit picking everything. Then I send a low ball offer (nothing too outrageous) but hey, the worse they can say is no. Also pull out a spread sheet and run some numbers. Then explain to the agent this is where you want to be for a purchase price.

Hope this helps Amber!

Originally posted by @Ethan Whittaker :

This is my goal.  Actually almost verbatim what I want to do.  Congrats on the success in your first Real Estate Deal. The fact you had to do no work on 3 out of 4 units is great.  

How did you find the property? What things should I think about now about a year away from the purchase? What things would you say most do not think about when dealing with the FHA and closing on a deal with the red tape involved?

Once again Congrats!

Thanks for reading Ethan.

I found my property through a multiple listings service based in my state. The MLS is a great source of knowledge on a property. I know plenty of people that will use real estate sites such has realtor.com or Zillow.

Always think of expenses. Just when you think you have all your numbers in place and feel confident with the results run them ten more times. I always round my income down and expenses up. I feel this is a great way to do it because your looking at it as a "worse case" scenario.

Hmm that last question is a little tricky. I went to a mortgage lender that I knew personally and sat down with him multiple times to come up with a plan to get my real estate investment plan on the move. So I had a solid rasp of what hoops I was going to need to jump through. I would say that finding a great bank/lender that you trust is the best way to deal with an FHA loan!

Originally posted by @Joe Fairless :

@Greg Szymborheck yes! What's next with your property going to be? 

Well Joe,

A little after a year of owning my first 4-unit I got a conventional loan on a 3-unit in the same city. The numbers have also been working great on this place and plan on writing another "blog/forum" explaining how I obtained it.

After getting my real estate license and co-founding a property management company in my local area I'm back on the hunt for another property! I hope to pull in another 3-4 multifamily shortly.