Washington DC Client Success Story- House Hacking Duplex

[Cassidy Burns]

Good Morning BP,

It seems a lot of Northern VA / Washington DC newer investors (and some experienced investors) are having trouble with pin pointing which strategy to attack. BRRRR is one that always comes up. In this higher priced and competitive market the BRRRR strategy is very hard to execute unless you have HUGE AMOUNTS of cash readily available. The house hacking strategy is what I'm recommending to a lot of my clients and personally doing myself to get started in real estate investing in Washington DC / Northern VA. I hope this is helpful!

I have a client who just purchased a Duplex in Capitol Hill Washington DC , one of the most sought after neighborhoods. She used FHA 3.5% down Financing. Lets jump into the numbers:

-Purchase Price: $1,005,000

-Seller Credit: $34,000 (covers all closing costs)

-Net Purchase Price: $971,000

-Appraised Value: $1,010,000

-$39,000 equity profit from purchase to appraised value

-TOTAL CASH NEEDED: $35,175

She bought a $1,010,000 Asset for less than $36,000.  This is great, but what happens when the monthly payments have to be made? 

-Mortgage: $5,398

-Lower Level Long Term Rents: $1,900/month

-Lower Level AirBnB Quote: $2,400/month (she's doing this option at first)

-Monthly Responsibility: $3,498 (she lives in 3 bed/ 2 baht single family house w/ garage parking and a roof deck for $3,500)

**Now if you want to accelerate the house hack, you could rent out the 2 rooms upstairs for $1,400-$1,500/month and live for $500-$600 in Washington DC

Once she moves out : 

-Upper Level Rent: $3,800/month

-Lower Level Rent: $1,900/month

Total Rent: $5,700/month

Total Cash Flow: $5,700- $5,398 = $302/month cash flow before expenses

Yes you will have expenses, but in my opinion, to get in a cash flowing asset in Washington DC, for $36,000 down is incredible.

Intial Equity: $39,000

Down Payment: $35,175

Cash Flow Once Moved Out: $302/month

Great opportunity for appreciation in a great location

Hope this helps! Happy investing. 

[Leo Watts]

@Cassidy Burns

Thanks for sharing. Definitely a good strategy for acquiring pricey property on the relative cheap. Did she have a very high income to qualify? Are you seeing good house hacks in the 600 range?

[Cassidy Burns]

Hey @Leo Watts, 

Since its a duplex, they were able to take 75% of the projected rents of the basement unit to help with her qualification . $1,900 x 75% = $1,425 would count towards her DTI.

Mortgage: $5,398 - $1,425 = Meaning she only had to qualify for a mortgage of $3,973/month.  

House hacks in the $600,000 range are possible, but in most parts of the city, $600,000 assets will not cash flow when you move out, strictly because that $600,000 price point is in neighborhoods where rents don't support a mortgage at debt of 96.5-97%

Cheaper isn't always better 

[Jerrod Hill]

This is a great example! I am in the process of trying to do it now with a property. Hoping that it works out. 

[Cassidy Burns]

Thank you @Jerrod Hill , good luck!