I want to highlight the success story of Jon Patterson most recent House Hack purchase. Excellent work with the full basement remodel and adding kitchenette! Keep on crushing it!
Granny Suite / STR Build-out in Basement perfect for House Hack
This is my first short term house rental. I have a long term condo rental in Chicago and I also do short term rentals for our camper.
Real estate investor since 2018 when I bought the condo. This is only our second house after a 3 year hiatus.
What made me interested in investing in this type of deal and strategy?
Our goal was to eliminate our own housing expense (i.e. rent/mortgage) by living in a house hack to determine how sustainable the house hack approach would be for us as a couple in the longer term. We know house hacks can have the highest financial benefits of all the strategies, but unsure how well it would work for us as a couple.
How did we find the deal?
After interviewing a few realtors focused on the Investor side and FIRE movement, I chose The Envision Advisors. Their expertise, tools, and resources were a critical determining factor for me. Positive attitude and hustle sealed the deal
How did we finance the deal?
Through my investor friendly lender recommended through Stacy Rozansky, but only after getting pre-approvals from other financial lenders and comparing fees.
Did you add value?
We remodeled the basement from only a 1-non-legal bedroom to a full 2-bedroom granny suite with laundry and a separate entrance. I interviewed and compared 3 different general contractors before making a decision based on quality, timing, and costs
What was the outcome?
The project was successfully completed with a 1.5 month delay. The short term rental was listed 1 month ago and has been rented for the majority of that first month as we build up reviews.
I hired a short term property manager knowing I could do the management myself as I live in the upstairs portion (house hack). However, I wanted to be completely hands-off. For me the goal of real estate investing is to build wealth now so I can get my time and freedom back. Similarly, I interviewed about 8 property managers before deciding on one that is very specific about how operations work so it’s cut and dry for my first short term rental and no surprises. They also operate in other Colorado areas that I am interested in purchasing next.
The property managers' forecasted revenue will be oddly very consistent, likely all using the same software, and forecasted the revenue would cover all the financing expenses alone including principal, interest, PMI, and taxes and a significant portion of utilities. Thus, I would essentially need to still pay for remaining utilities, maintenance, landscaping, etc.
I am currently in the process of getting the house reassessed to see if post renovations, we have 20% equity in the house and can drop PMI. This is a hefty target and I am unsure if we will hit it.
Lessons learned? Challenges?
Learned to screen tenants based on Jeff Whites screening standard procedures. This made the process easier and minimized potential errors with future tenants.
While living in the house being renovated was stressful, it was very exciting and inspiring. My partner and I really enjoyed fixing up the house together and debating functionality vs design. We would absolutely do another large renovation together, but likely not live in the house during renovations.
Next, I foresee us purchasing more short term rental properties across Colorado and the USA so we can also take advantage of the homes for smaller vacations. Our goal was never to optimize our profit. Our goal is to buy a portfolio of properties that fits our vision of where we may want to travel and live throughout our lives while acquiring them for “free” and/or make a smaller profit on them.
I love this! Great work, I am looking to do this same type of thing in Denver and I am curious how it went getting the STR license in Denver? I was reading on BP the other day that new laws may be coming into effect on STR in Denver that will affect basement units for STR. One in particular was that you cant have doors or walls cutting off the primary to the basement unit/STR rental as that would change it from being part of the primary to a separate residence. I have not see actual updates to the laws but it was being discussed like it was going to happen. Do you maybe know more?
@Luke Stewart. Congrats it is a great business model to implement. Yes, investing in a similar property in Denver County can be chalenging with the ever changing laws and Denver's (very) strict enforcement. The property mentioned in this post is located in Northglenn, CO. A few miles north of Denver.
All of that is why I personally choose to invest in similar properties outside of Denver County (lakewood, wheat ridge, arvada, etc.). Will shoot you a PM to connect and chat everything house hacking and your goals.
@Michael K Gallagher thank you for the shoutout! Yes, Jon is a pretty busy W2 and wanted as much hands off as possible. However, with just a few systems set up, self managing a STR is not overly too much work.