First deal - house hacking. What do you think?

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First deal - house hacking. What do you think?

Samuel Carmichael
Rental Property Investor · Providence, RI · Member since 2016 · 67 posts · 10 votes

Hi Rhode Island, and Providence BP'rs. 

I found a fairly interesting way to structure my first deal and I am wondering what you think of it.

I have under contract 60

Linden street Pawtucket RI  MLS1123800.

It was a forclosure listed at 169,000. 

I got it under contract contingent on Rhode Island renewal program and 3.5% FHA.

Price 169,000

Offer. 157,250 

(3,000 back for closing)

downpayment (20,000) Rhode Island renewal plan.

Total mortgage. 137,250 

So long story short, I pay 2,000 in closing costs - and get the state of RI to give me 20,000 on a downpayment. It was listed at 169,000 and we got it under contract for 157250 with 3,000 back for closing.

It's a 3 BR, 2 BR single family w/ a partially finished basement.

One of my exit strategies since I must live in home for 5 years in order to not have to repay the 20,000 grant - is to rent out then3 brs up stairs with private bathroom, and full house access for 1,000.

I test posted an ad on Craigslist as was getting 1 person a day interested in it.

I would live in furnished basement and after 5 years and 20,000-30,000 of mortgage paid down by the renters - hopefully sell for the market value or hold for my rental portfolio I am starting.

It was hard to use the calculators for this because I was renting and living but I calculated 1400 expenses including 5capex   5% vacancy full landlord utilities and all that jazz.

Seems like it would still cash flow $100 if you could rent it out for 1600-and break even for 1500.

But I was more or less thinking of getting some instant squirt to pull out later in 5 years after sale or just in general to use for more deals.

Also wholesalers in Rhode Island I am looking for you. Looking for low value cash deals or....would consider partnering with a wholesale

Pro(20+deals) to split profits if you teach me the paperwork and systems better.   My skills are on the phone sales (extremely high Level) in person sales ( high level) and taking action. Not a tire kicker. I love to close deals

Long story short I get into the property w/ only inspection money and 2,000 dollars. Plan to sell after 5 years and hoping for 20,00-50,000 pure profit.

http://m.estately.com/listings/info/60-linden-st--...

Sam

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Anthony ThompsonPro Member
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
10y

Sam, that's a lot of info. My bullet point thoughts are:

* You have to live somewhere; if you can make your residence also provide some rental income and property management experience, so much the better

* Do you actually want to live in that house/area, apart from the #s?

* Based on the house & area, what kind of tenants are you going to get?

* When you go to sell, are other people going to want to buy the house/area?

* Free money is always awesome; take it when you can get it

* However also read the fine print; besides the 5 year thing, make sure there's not also a clause saying you can't rent it out

Free government money is great, but just read the docs. I once insisted on reading the 25 pages of documents that accompanied a no interest lead renovation loan. Turns out buried on page 19 was something saying for 5 years I could only rent the units to people who made 40% or less of the median income, or something to that effect. Made the no interest loan pretty expensive - I passed.

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  • Samuel Carmichael
    OP
    Rental Property Investor · Providence, RI · Member since 2016 · 67 posts · 10 votes
    10y

    and the word squirt iPhone  autocorrect. It is supposed to be equity.

    0Reply
  • Stephen Torti
    Investor · Providence, RI · Member since 2016 · 138 posts · 40 votes
    10y
    Hey Samuel Carmichael. Sounds pretty good to me, I'm working on something similar in RI but I really want to go 3-4 units. Get that cash flow going ASAP. Keep in touch would like to bounce ideas off each other since we're in the same market.
    0Reply
  • Anthony ThompsonPro Member
    Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
    10y

    Sam, that's a lot of info. My bullet point thoughts are:

    * You have to live somewhere; if you can make your residence also provide some rental income and property management experience, so much the better

    * Do you actually want to live in that house/area, apart from the #s?

    * Based on the house & area, what kind of tenants are you going to get?

    * When you go to sell, are other people going to want to buy the house/area?

    * Free money is always awesome; take it when you can get it

    * However also read the fine print; besides the 5 year thing, make sure there's not also a clause saying you can't rent it out

    Free government money is great, but just read the docs. I once insisted on reading the 25 pages of documents that accompanied a no interest lead renovation loan. Turns out buried on page 19 was something saying for 5 years I could only rent the units to people who made 40% or less of the median income, or something to that effect. Made the no interest loan pretty expensive - I passed.

    1Reply
  • Jay Orlauski
    Realtor · Fresno, CA · Member since 2013 · 471 posts · 225 votes
    10y

    @Samuel  - never heard of this type of program before - we have some similar types of grants here but I am in California. Sounds like if you are willing to live there for 5 years than it could be a good deal for you - you will have a roof over your head and tenants paying down your mortgage - and 20k  grant doesn't hurt either.  

    but getting $1000 vs $1600 is a big difference so check the area and see if the rents in the area justify that. You can always compare it to you existing rent and see if it is more or less - if less than great! if more - you have to come to terms with what you are willing to pay and wether or not the "squirt" is going to be there in the future. 

    by the way - I think you just invested a new slang term for "equity"  - I am now going to refer to equity as "Squirt"  - I like it - 

    Another exit strategy could be to take some 'squirt' out of it and then 'lease to own' it to someone else for above market pricing.  Still collecting income , but none of the responsibilities of a landlord. 

    Let us know how it works out for you -best of luck to you!

    0Reply
  • Bryan McKeen
    Real Estate Agent · Wyoming, RI · Member since 2016 · 16 posts · 4 votes
    10y

    I'm all aboard the squirt train as well haha. I thought that was some real estate lingo I had never heard of before. I've been looking into the Rhode Island Renewal Plan myself as I would also qualify under the first time home buyer designation. What Anthony said about "Do you actually want to live in that house apart from the #'s?" resonates with me. That is something that shouldn't be taken lightly (5 years is a long time) 

    0Reply
  • Anthony ThompsonPro Member
    Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
    10y

    Years ago when I was in a real estate class at NYU the teacher said, "You can't buy dinner with equity" - or, for that matter, squirt

    0Reply
  • Stephen Torti
    Investor · Providence, RI · Member since 2016 · 138 posts · 40 votes
    10y
    Hahah this is a great thread. Bryan McKeen I've been hammering away that gov program for a few weeks now. I think I've decided not to go with it, the inventory in the area is too picked over for a multi family house and I don't care if I live in it or not. Being tied to something for 5 years is a lot right now for me
    0Reply
  • Stephen Torti
    Investor · Providence, RI · Member since 2016 · 138 posts · 40 votes
    10y
    Plus the areas of foreclosed multifamily homes. Ehhhh Central Falls, South Prov. Etc.
    0Reply
  • Stephen Torti
    Investor · Providence, RI · Member since 2016 · 138 posts · 40 votes
    10y
    If probably want the top floor just so the bullets can go straight in my window
    0Reply
  • Stephen Torti
    Investor · Providence, RI · Member since 2016 · 138 posts · 40 votes
    10y
    Can't*
    0Reply
  • Samuel Carmichael
    OP
    Rental Property Investor · Providence, RI · Member since 2016 · 67 posts · 10 votes
    10y

    Thanks guys good insight. 

    I am right on the Fringe, to the right of the house is the main drag and its not too nice, but I still feel comfortable near it. On the left of the house is nearly all single families, and a bit above Rumford near Darlington. It is also a 6 minute drive to South Attleboro train station. 

    0Reply
  • Teralyn Seabrook
    Pawtucket, RI · Member since 2016 · 3 posts · 0 votes
    9y

    Hi Everyone!

    I've recently moved to Pawtucket and I'm interested in purchasing my first multi-unit property using an FHA.

    I know this forum is from awhile ago but does anyone have any additional information on Rhode Island Firsthome100 loan? Is this the same as the renewal program? I can't seem to find any detailed information on the program but it sounds like you have to live in the house for 5 years. So does that mean if I purchase a multi-unit, I'd have to live in one of the units for the 5 years?

    0Reply
  • Bryan McKeen
    Real Estate Agent · Wyoming, RI · Member since 2016 · 16 posts · 4 votes
    9y

    Hi Teralyn,

    I believe they ended the Rhode Island renewal program at some point this September.

    0Reply
  • Arthur L Dusenbury
    Investor · Schaumburg, IL · Member since 2016 · 34 posts · 14 votes
    9y

    My strategy is always buy right going in.  I never chase future equity.  I learn from friends that got hammered buying with low irr hoping that the market will keep soaring.  As soon as Blackstone starts dumping properties for huge profits the current retail frenzy will leave more inventory then buyers.  

    I also keep long term in the short term decisions.

    What ever you decide good luck and Merry Christmas and happy new year.

    0Reply
  • Carlos Tavares
    Real Estate Professional · Pawtucket, RI · Member since 2016 · 133 posts · 79 votes
    9y

    Well that's a decent part of providence, but I would prefer a 3-4 unit as first buy for cash flow. Another option would be a 203k loan for first time buyer for fixer uppers .  

    But if you are gonna rent upstairs and live there, start saving as much money as possible from your end since you should be living almost free don't waste the next 5 years not planning/working towards your next deal 

    0Reply
  • Carlos Tavares
    Real Estate Professional · Pawtucket, RI · Member since 2016 · 133 posts · 79 votes
    9y

    @Teralyn Seabrook

    Have you looked in RIHousing website?  I believe they have info about that program if it's still around or a link there about it

    0Reply
  • Teralyn Seabrook
    Pawtucket, RI · Member since 2016 · 3 posts · 0 votes
    9y

    Thank you all for your advice! @Carlos Tavares I checked the website but they didn't have any detailed information regarding how long you need to live on the property.

    0Reply
  • Carlos Tavares
    Real Estate Professional · Pawtucket, RI · Member since 2016 · 133 posts · 79 votes
    9y

    I believe you will need to live in for 5 years to get best rate and down payment assistance 

    0Reply
  • Samuel Carmichael
    OP
    Rental Property Investor · Providence, RI · Member since 2016 · 67 posts · 10 votes
    9y

    @Teralyn Seabrook I got a call from my lender the other day asking if I knew anyone else who wanted to do the renewed homes program. Its hard to get through the paper work but the 20,000 forgivable second is awesome. 

    It is only a valid option if you want to buy a forclosure 1-4 unites. Connect with me on here. I sent you a request. 

    1Reply
  • Teralyn Seabrook
    Pawtucket, RI · Member since 2016 · 3 posts · 0 votes
    9y

    Awesome. Thank you!

    0Reply
  • Raymond Lewis
    Rental Property Investor · Boston, MA · Member since 2017 · 46 posts · 11 votes
    8y
    Originally posted by @Samuel Carmichael:

    @Teralyn Seabrook I got a call from my lender the other day asking if I knew anyone else who wanted to do the renewed homes program. Its hard to get through the paper work but the 20,000 forgivable second is awesome. 

    It is only a valid option if you want to buy a forclosure 1-4 unites. Connect with me on here. I sent you a request.            

    @Samuel Carmichael.    Can you direct message me your lenders information please ?   I would definitely be interested in a foreclosure multi family property.   Preferably in Pawtucket.  

    0Reply
  • Samuel Carmichael
    OP
    Rental Property Investor · Providence, RI · Member since 2016 · 67 posts · 10 votes
    8y

    Update on this post, I am going to list the house I house hacked on 10/9. 

    I will clear $30,000 to $36,000 USD in profit. 

    I did about a 8K rehab. 

    0Reply
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