Primary Condo House Hack
Investment Info:
Single-family residence buy & hold investment in San Diego.
Purchase price: $355,000
Cash invested: $90,000
Sale price: $439,000
Purchased a 2bed/2bath condo in Pacific Beach for my residence. Government offered Federal AND State tax credits for first time buyers as part of the recovery from the housing crisis. Initially I had a roommate for two years whose rent paid half the mortgage. I then moved elsewhere and rented both bedrooms. Sold the property less than 2 years later and was able to pocket all gains tax free having lived in the property 2 of the last 5 years.
What made you interested in investing in this type of deal?
Housing market was heading towards a low point after the 2006-2007 bubble burst and the numerous tax advantages for new home owners made it very advantageous.
How did you find this deal and how did you negotiate it?
RedFin. Once I found the deal I asked my dad (from out of the area) to act as my REA. The listing was 30-60 DOM and we were able to negotiate $40K off list.
How did you finance this deal?
80/20 conventional financing for primary residence
How did you add value to the deal?
The condo had an awkwardly small living room so we moved a wall to add 25-30 sq ft which didn't impact the bedroom all that much. Before sale I spent $10K in make ready to fetch top dollar.
What was the outcome?
Sold for substantial tax free profit, used proceeds to finance down payment on my current residence.
Lessons learned? Challenges?
I did learn a hard lesson on the State tax credit being offered. The stipulations were that I live in the property for the first THREE years, not TWO. I ended up having to reimburse the government with the $10K tax credit! All in all it was still a positive experience.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
My dad!
Congrats Brian! I live in Pacific Beach right now and it's one of the areas I am looking to house-hack myself in these next couple of months. When did you buy the property? That sale price looks really really low.
-Trev
Hi Trevor- thanks! I owned the condo from 5/2010 through 2/2014, so yes the price was very low compared to now! I probably could have held on longer for more appreciation but it was slightly negative cashflow as a rental and I needed the cash for my house purchase in Encinitas so I took the $80K capital gain tax free and sold. I'm not sure what the rental market is like in PB these days but I imagine it will be hard to make the numbers work as a rental property if you move out. It's nice to have a roommate pay some of your mortgage, but you may need to plan on living there several years until the numbers make sense as a pure rental.
Though the PB life is invaluable and I would never trade my time there, it would at least be worth exploring some multi-unit properties in the east and northern parts of the county. You can take advantage of owner occupied financing for a multi unit, and then move back to the beach if prices cool off in the next 2-3 years. Good luck! Happy to share tips.
@Brian Moore Thanks for the update! Yeah this is exactly what I'm slowly finding. Still have lots of research to do and I am definitely open to north county. We'll see how things go as I save up and learn more. Good luck!