Moving out of 2 year house hack
The first part of this house hacking success story could have been written a couple years ago, but it wasn't, so here is the final part!
We bought a duplex with owner-occupied financing in March of 2015. We had to evict the inherited tenants and then clean the unit (@Lucas Miller did almost all of the cleaning and remodeling!) after they trashed it, but we moved into one unit in May of 2015. 7 days after we moved in, we found out the inherited tenants had left us with bedbugs, so after getting rid of those and finishing the remodel, our tenants moved in September of 2015. The rent from that unit paid for all but $14 of the mortgage/insurance/taxes, so we have basically been living for free for the past couple years!
We closed on a new home (which I think deserves it's own success story in the Denver market) a couple of days ago and will move out of our unit of the house hack in a couple weeks. Our new tenant will move into our unit on 4/1, at which point we will start pocketing $600/month in cash flow. We drastically underestimated what we could get in rent when we first analyzed this duplex, so we really lucked out. Our new home is just a couple miles from this duplex, so we will continue to manage it ourselves. There is more than enough room in the numbers for property management if we decide to do that later though.
The best part however, is that we didn't use our own money for the down payment. Some family members had some money they wanted to invest with, but didn't want to put the work in. We wanted to put the work in, but didn't want to invest our own money. So it was a win win for everyone. We are taking the cash flow now and they will take a larger chunk of the capital gains when we sell it.
Here are the numbers:
Purchase price: $299,000
Down payment: 20%
Monthly Rental Income: $2,800
Cash flow: $714 (we're counting on $600 after taxes)
We learned so much from this deal (including, but not limited to):
- Inherited tenants are seriously the worst
- Bedbugs are a thing
- Conservative underwriting in the beginning is so worth it
- We are unapologetically bad at painting
I know everyone says this, but this deal definitely would not have happened if it weren't for Bigger Pockets. We spent an embarrassingly long amount of time in analysis paralysis (like 2 years, seriously embarrassing) before we pulled the trigger, but we are so so glad that we did!
Over the last 2 years we have also flipped a condo (thanks @JeanBolger!) during this time and are about to close on another flip in a couple weeks. This first deal really gave us confidence to start building a business around real estate investing.
I don't know if we are qualified to give advice yet, but if we are, it would be to just take the first step and buy your first deal. It takes courage and confidence, but you just have to do it. It might not be a great deal, but you will learn so much from it and the future deals won't be nearly as scary. Also, house hacking is the greatest, we definitely recommend it!
Congrats on the success & positive experience! Eek, can't imagine having to deal with bedbugs, will definitely be more careful in the future.
Was your lender ok with you renting out the other half & with you quit claiming the title to an LLC?