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Craig Curelop
  • Real Estate Agent
  • Post Falls, ID
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House Hacking Case Study -- Denver, CO

Craig Curelop
  • Real Estate Agent
  • Post Falls, ID
Posted Mar 25 2020, 13:51

Hello everyone! I know times are tough right now and the worst part of it all is the uncertainty and the lack of control we have dealing with this coronavirus. The only thing we can do is prepare ourselves for the worst and hope for the best. With that being said, house hacking can and has put anyone in a much better decision by having other people pay their mortgage while work has either slowed down or completely stopped. 

I wanted to share with you a case study of one of my friends and clients, @Daniel ONeill. The property, the numbers, and what he is doing now. 

The Property: 

  • - A 5 bed, 3 bath single family home in Centennial, CO 
  • - 3,310 total square feet
  • - Unfinished Basement
  • - Built in 1979
  • - Fully Updated and Turnkey (excluding unfinished basement) 
  • - 4 bedrooms upstairs, one downstairs

Strategy: 

  • Rent out the top 4 rooms immediately 
  • - Convert the house into a 6 bed, 4 bath by adding bedroom and a bathroom to the basement
  • - Rent out the 5 nicest rooms while he occupies the least desirable room. 

The Numbers:

  • Purchase Price: $430,000 with $5,000 in seller concessions (listed at $440,000)
  • - Down Payment: $21,500
  • - Rehab Costs: $24,000
  • - Total Initial Investment: [Rehab + Downpayment]
  • Rent: $4,400 -- this INCLUDES the rent he pays himself AND the added bedroom downstairs 
  • Mortgage Payment: $2,450
  • Rent Above Mortgage: $1,950 
  • Less Reserves: $500 -- Reserves include Capital Expenditures, Maintenance, and Vacancy. 
  • Monthly Cash Flow: $1,450
  • Annual Cash Flow: $17,400
  • Total Investment: $45,500
  • Cash on Cash Return: 38.2% 
  • Estimated Appreciation: $480,000
  • Loan Paydown: $10,000
  • Total Net Worth Return on Investment (NWROI):
  • Annual Cash Flow: $17,400 
  • + Appreciation: $50,000
  • + Loan Paydown: $10,000
  • Total Net Worth Gain: $77,400
  • / Initial Payment: 45,500
  • NWROI: 170% 

Commentary: 

This deal is a great one! Any property you can convert into a 6 bed, 4 bath will likely cash flow you a lot. The idea here was the more beds and baths we can get for our money, the more profitable it will be. 6 months later and in the midst of the mysterious Coronavirus, Danny sits in a good position with significant reserves, a cash flowing property that pays him if his work does not, and also realizing quite a bit of appreciation and tax advantages (not mentioned in the above). 

What Do You Think? 

In hindsight would you have done this deal had you been in Danny's shoes? 

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