All Forum Posts by: Ben Einspahr

Hello BP community. Wanted to highlight the details of Ryan Corbeils first house hack purchase. Deal closed April of 2023. Investment Details below! Great job Ryan!

Investment Info:

Rent by the room house hack.

4 bedroom/ 3 bath single family home located in Denver Colorado (converted to 6 bedroom).

Cost while living there will be about $750/month

After moving out, will be slightly cashflow positive using conservative numbers.

5.5% interest rate. (paid down the interest rate).

Purchase Price:

$620,000

Cash Invested:

About $37,000. Includes about $15,000 in repairs my real estate agent, Jeff White, was able to negotiate $18,000 in seller credits!

What made you interested in investing in this type of deal and strategy?

I reached out to Chris Lopez and the Envision Advisors team about a year ago looking for guidance on how to get my foot in the door with real estate investing. Shortly after connecting with Jeff White, I understood the amazing possibilities that rent by the room house hacking had.

Jeff’s expertise and guidance were immensely helpful throughout this process with his 7+ years of house hacking experience and tenant screening.

How did you find the deal and did you or the agent need to do any negotiating?

Jeff sent me this off-market deal from one of his connections. Oh, yes, there were negotiations. We were able to beat another cash-competitor buyer and obtain 3% in seller credits and buy my rate down to 5.5%

How did you finance the deal?

Conventional 30 yr, 3% down. This was an adventure, as my original lender backed out with only about 1 week left to close. Matt at Impact Lending led his team to help me close the deal with a well-known mortgage lender.

Did you add any value?

I'll be turning 2 of the rooms into bedrooms. I contracted to re-side the exterior, replace the electrical panel, install external sewer clean outs and I'm in-progress installing LVP flooring in the basement from a "welcome to homeownership" sewer backup and flood within a few weeks of moving in.

Annual return below reflects after moving out.

Keep on crushing it Ryan!

@Owen Koziol House hacking is a excellent way to get your foot in the door. That is how I got my foot in the door with real estate investing back in 2016 in Omaha, NE!

Here in Denver, multifamily house hacking does not make since from a financial perspective but in Lincoln... i think you can definitely make it work. Lending will be your biggest hurdle. Small multifamily consists of duplexs, triplexes and fourplexs.

Duplexs- FHA will be your best bet as you can still invest with 3.5% down. Convention will require 15% down min.

3-4 units- This gets a little more tricky. Only loan you can use is FHA. Downside is that you will have to pass the self-sufficiency test. This means that 75% of gross rents must cover 100% of the mortgage (principal, interest, taxes, and insurance).

Here’s a simple example:

Mortgage = $4,000/month

Unit 1 = $1,000/month

Unit 2 = $1,000/month

Unit 3 = $1,000/month

Unit 4 = $1,000/month

Total Rents = $4,000/month

$4,000 x 75% = $3,000

This example fails the test by $1,000/month. To pass, you must put down a higher down payment amount until your monthly mortgage is less than $3,000/month.

For this reason,  I would lean towards duplex.

Rent by the room house hacking- Another option is to consider buying 4+ bedroom home, living in the master and renting out the other homes. That will be the best option for least amount out of pocket. 

Next steps- Find your self an investment friendly lender and RE agent. They will be able to help build your team and identify your buy box. BP is great place to start.

@Ethan Fowler Welcome to BP! I can definitely relate when I was first starting out and trying to get my fiancé on board. I was set on less privacy/less space and she was set on more privacy/more space. 

Luckily we were able to find a happy medium. 4 bed/3bath that had separate mother-in-law suite above attached garage. I knew this would not cash flow while living there but would make for a good rental after moving out (what mattered most to me). I think our average monthly cost while living there was about $1,000. Still better than renting. I'll take it :)

This is something to take into mind. Find a place your wife is onboard with. You might not be technically living for free, but will make for a great rental after moving out in 1-2 years and on the the next one.

A couple of months ago we did 6 part webinar series on house hacking in Colorado in our higher interest rate environments with case studies and interviews with local experts. Happy to share the recordings and slide deck if you want… let me know

@Thomas Cantley before dropping your reliable (though stressful) W2 and going all in on something you do not have any experience in... I would leverage your W2 to qualify for traditional financing and house hack. There is an immediate boost of ~$1000/month in savings plus a future rental. 

Grind it out at your W2 to do this 3-4 times over the next 5 years, reevaluate your goals then make a move. Your cashflow from your HH's turned rentals and net worth growth will give you much more flexibility. 

Pros

-Less capitol to get started 

-Much less risk.

-Higher success rate of successful HH'er vs. wholesalers

-Higher ROI

Happy to send some case studies to put some context to it. Let me know!

Best of luck

@Jassiem Robinson no need to BRRRR a house hack. You are already getting amazing financing with 5% or less down payment. Plus you can not get hard money loan for primary res. Keep it simple!

On the other side, doing a live and flip house hack? Yes that is more possible and realistic. Example: Buy duplex. Live in one unit, rent out other. Fix up unit while living there. When finished, move into other side and do the same.

If i was in your position, I would talk to a lender first before running any more deal analysis. After you talked with lender, then you can identify what your buy box looks like. Then start analyzing.

@Matt Heidenfelder love the idea. Opens you up to lots of inventory to choose for to successfully execute. To address a few questions

- no this would not convert it to a multi unit or separate mailing address. No rezoning necessary If needed you can add 2nd mailbox and call one unit A and the other unit B. Will need to be communicated with Post Office or have a conversation with the person that delivers the mail

- permit is recommended but not 100% required. Here in Denver I have bought multiple properties with similar layout to execute the same strategy you are describing that did not have permits.... come to think about it, I remember asking but did not receive anything because it was a quick close and the property had such amazing potential due to the additional income while living here. 

- Before looking to build all of this yourself, do something similar to what I did. Find properties on the market where someone has already done this work for you. 

Here are a few example I found with a quick zillow search. 

https://www.zillow.com/homedet...

https://www.zillow.com/homedet...

Quote from @Jason Hawkins:

Quote from @Ben Einspahr:

@Jason Hawkins, Like any post, you will get multiple responses with all different recommendations. None are wrong. But like @Jordan Malara touched on, depends on your specific goals. I once heard, its like asking advise on whats the best car.

I am on the other side of the spectrum. Based on the info provided and the understanding that you are wanting to grow your rental portfolio + net worth, here are the 2 options I would consider:

Option 1

Stay put in your current primary and leverage the remaining balance on the rental HELOC to purchase a 2nd rental property. $100k will not get you anything in the springs but you could get a pretty decent rental in Pueblo. Cashflow will not really move the needle for you but your net worth will grow (tenants paying down mortgage principle, appreciation even thought it might br pretty modest the next year or so, and depreciation).

Option 2

Stay put in your current primary and leverage the HELOC on your rental and invest in a passive fund. Higher returns than stock market and do not have to deal with the management. Whether that is managing the property or the property manager. Downside to this is the interest from your HELOC will offset a good chunk of the 17-19% returns you would get from investing passively

Again no answer is right or wrong. These are just the options to consider.

Back in May we ran a deal analysis on a pueblo duplex in our high interest rate environment. Happy to share the recordings if you want… let me know

Thank you. What type of fund? And I would love to know more about the Pueblo duplex if you don’t mind sending some info on the recording?

 @Jason Hawkins I will DM you the details

@Pichael Miper Holmes congrats on the new purchase! I just finished going through this same process putting a rental (former primary) under an LLC.

I would connect your lawyer that drafted LLC operating agreement for you and ask them to file a quit claim deed with the county. They will need copy of deed from title company and county property is located in.

After you have done that, be sure details have been communicated with insurance (add LLC as additionally insured).

Also if you have not already, make sure you have separate business checking account for all transactions.

We just recently recorded a webinar called, should I put my house hack into an LLC. Even though this is not a house hack, there is still info in there you can apply to your business. Happy to send the details.

Quote from @Sara R.:

Quote from @Ben Einspahr:

@Sara R. so sorry to hear that you have not had any luck getting your rental property under contract. Are people still buying + investing in Denver? 100%! With the low inventory and if priced correctly, home are not lasting long.

If your listing agent is saying no one is touching Denver, you need a new agent!

Have we seen a decline on investor interest in Denver County due to the landlord licensing policy in Denver? Not really...

Happy to send you some updated RE trends to help point you in the right direction. Let me know.

Thanks Ben. I thought it was really strange that an inspection and $50 licence fee every four years would be holding that many people back... 

Ideally, I want to avoid the MLS so maybe that's the issue? I don't think the pricing is the issue as I told her there was flexibility. I care more about closing quickly. Where can I go to list off-market deals? She said she had an investor email list, but I'm not sure how extensive it was.

might be worth seeing how large that email list is and how they are marketing your rental. When we add properties to our deals list, we do a full market analysis so the investor can get a clear picture what types of returns they can expect.

@Sara R. so sorry to hear that you have not had any luck getting your rental property under contract. Are people still buying + investing in Denver? 100%! With the low inventory and if priced correctly, home are not lasting long.

If your listing agent is saying no one is touching Denver, you need a new agent!

Have we seen a decline on investor interest in Denver County due to the landlord licensing policy in Denver? Not really...

Happy to send you some updated RE trends to help point you in the right direction. Let me know.