All Forum Posts by: Ben Einspahr

Hello, @Christian Albright. I could not agree more with @Nick Cooley. Turn you current HH into a stabilized rental and buy a second HH. There are great loan programs out there that would be perfect for a savvy guy like you. You should check out the Bank of America Grant Program.

I have an out of state rental but I am not a fan of it. Mainly b/c I do not have a good team in that market. However, I am a fan of diversifying your portfolio in on state with only a 2-4 hour drive away. It is worth looking into the Springs and Pueblo. In 2023 my plan is to 1031 my first HH into a multiunit in one of those markets. I have investor friendly realtors and contractors I trust there.

Best of luck!

Hello @Dylan Peake, Big congrats on you first post! @James Carlson did an excellent job explain the benefits of starting now vs. waiting 3 years. I could not agree more. Purchasing a home may not be as expensive and you think. There are some excellent grant programs out there perfect for savvy guys like your self.

Check out this story of a client we worked with that used the Bank of America Grant Program to purchase his first 2 properties. First property he bought for $6,000 all in and his second he bought $24,000. Here is a link that dives deep into the numbers.

Details about the program. $10,000 downpayment assistance. $7,500 towards closing cost (however, most closing costs to not total $7,500 so you can remainder of that $7,500 towards paying down interest). And here is the cherry on top, No PMI. 

Best of luck!

@Sam T., yes. I believe BOA is the only one that offers it. And yes no brainer indeed. On the flip side of the coin, they are a very large bank so they only offer standard closing option of 30 days. Can make it challenging in this current market with other investment friendly lenders offering 10-14 day closes. The quick close option is what got me into my HH back in 2019. 

@Tanner Crawley, That definitely sounds like a win-win!

@Jeff White, I bet @Kevin Main has some amazing equity build up. I am sure there are a lot of different ways to get creative for future investments.

This House Hack Success Story is a twofer! I am highlighting @Kevin Main first 2 House Hacks. What I love most about these two properties is how Kevin leveraged the power of the Bank of America Grant Program. ($17,500 in downpayment assistance and no PMI) Shoot my a PM if you would like to know more about the BOA Grant Program.

Kevin was able to purchase $947,000 worth of real estate (not including any of the crazy appreciation we have seen over the past few years) with a total combined investment of only $30,000. That is really leveraging debt in your favor

HOUSE HACK #1

Investment Info

Half Duplex SFH that has been converted into an over/under duplex in Southeast Denver (Westwood). Purchased in July of 2020

Purchase Price:

$367,500

Cash Invested:

$6,180

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

Kevin has been interested in real estate investing for a while as he had seen a couple friends be successful at it as well. For a long time he assumed he didn't have the money to buy a house, but the more research he did about different options, the more realistic it felt. House hacking is a great way to get your foot in the door with REI.

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

The deal came from the MLS. There were some small negotiations on purchase price and repairs, but nothing too serious.

Did you work with any real estate professionals?

Lauren Valinoti with Envision Advisors

How did you finance the deal?

This is definitely the most amazing part. As part of a Bank of America program I was able to purchase the house using a conventional loan with 5% down. As part of the deal, I received a $10,000 down payment grant, $7,500 towards closing costs, and even with 5% there is no PMI! 3.25%, 30 year fixed.

Did you add any value?

As of now, Kevin has not done any value add projects. This is something that will be tackled in the near future.

What was the outcome?

Kevin moved out of the property in October of 2021 and it is now fully rented. The property is doing well and aside from some larger cap ex projects that will be needed in the near future it is performing well (financially)

Lessons learned? Challenges?

This was a great learning experience. It was his first time being a landlord and it happened to be during the start of a pandemic with tenants that were struggling to make rent...which was not disclosed during the selling process. He also found a roach problem that was not flagged in the inspection, so that has been an ongoing battle.

HOUSE HACK #2

Investment Info:

Single Family Home converted into an over/under duplex. Purchased October 2021

Purchase Price: $579,000

Cash Invested: $23,942

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

Kevin learned that he could use the Bank of America program for a second time. Once you have 2 mortgages under your name, you are unable to use the program. Property must also be your primary residence

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

Another MLS deal. Minor negotiations.

Did you work with any real estate professionals?

Lauren Valinoti with Envision Advisors

How did you finance the deal?

Bank of America Grant Program. 5%down, 2.125% interest rate (that is not a type-o), 30 year fix. No PMI

Did you add any value?

The property had been recently renovated before purchasing. The only addition made was replacing a chain link fence in the back with a nicer wood fence.

What was the outcome?

Kevin currently has the top unit rented and lives in the bottom unit. When it is all said and done paying about $900/ month.

Lessons learned? Challenges?

After having 1 house hack under his belt, Kevin was much more confident going into house hack #2.

Nice work Kevin!

Picture below is of house hack #2

@Jeff White made an excellent point. It sounds like you already have a pretty diversified portfolio with rentals in multiple state. What better way to continue diversifying by investing in Denver with a STR. Even with exceptionally high RE prices in the Denver Metro Area, running an investment property as a STR can work to your favor.

Yes, we are in the slower season right now, but that definitely balances out during the chaos of the summer. If you are managing your pricing appropriately, you nightly rate should vary by about 40% throughout the whole year. 

A good STR PM is definitely worth their heavy 25% management fee. You can can save a little of that PM fee just by implementing a few simple processes I have fine tuned over the years of managing my STR's in Denver.

Keep on crushing it @David Klaff

@Patty Nisbet you can buy a duplex if it is still your primary residence. When you get to triplex and quad, purchasing as a primary residence can be very challenging b/c in order to qualify for the loan, you will need to prove the home will pass the the self sufficiency test. Meaning, 75% of the total market rent for all the units has to be more than the total monthly mortgage payment (PITI). Simply put, if you expect to bring in $4000. Your mortgage payment can not exceed $3000/month. However, I have found duplex's do not make the best HH's because they are very expensive, competivie to get into, and typically need a lot of work to get things up and running. From a pier numbers prospective, single family homes will give you far better return on your investment

I know the feeling trying to house hack with a family. It can be super overwhelming. I have a daughter of my own so it definitely throws the rent by the room strategy out the door. Where I have found a majority of the homes that fit the criteria you are look for has been in the West/ North West side of Denver Metro Area (Lakewood, Wheat Ridge, Arvada, Westminster). Plus those areas have pretty friendly non-owner-occupied STR laws.

Finding a home that will make a good STR? My personal opinion, with good pictures, nice furnishings, competitive pricing, and creating excellent guest experience, any home (for the most part) will make a great STR. STR's are my jam!

It is easy to see you are super motivated and determined to make it would. With that attitude and mindset, I know you will find yourself a top notch house hack

@Jeff White, I think this one might be a runner up to your Custer St. HH. (ding ding ding, round one!)

Pre-college, no. Starting freshmen or sophomore year of college, I would have 100% done rent by the room. Being so young, I would have not been able to qualify for a mortgage or down payment so I would have asked my parents to be co-signers on the loan and asked for a loan from them for the down payment. Ideally, my renters would cover the mortgage. The rent I would have paid would go directly to my parents to start paying off that loan I received from them for the downpayment. Since I would be renting to college students, I would have their parents co-sign on the lease agreements to cover any rent if they cant.  Yep, I have thought about this a time or 2. 

Funny story, at one point when I was in college, my dad mentioned if I wanted to do something like this and it just went in one ear and out the other. Big missed opportunity.

Mr. @Jeff White, Great point. I think you and I can both relate to running into some speed bumps with our first investment property. Ryan ran into a few more speed bumps on this first one than I did but still managed to still come out on top! Excited to hear hear what he lands for HH#2. I am going to quote something I learned from you, REI is a people business, no matter what part of the business you are in!

Hello Fellow Investors,

I want to share a success story of a local “rent by the room” house hacker we had on our House Hack Mastermind Podcast back in 2021. @Andrew Lloyd purchased his first house hack in Lakewood CO November of 2020.

Investment Info:

3 bed/ 3 bath single family home.

Spoiler alert. The property is now a 6 bed/ 3 bath after a small $5,000 investment.

Purchase Price:

$460,000

Cash Invested:

$24,000

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

As a first-time investor without much capital, house hacking offered Andrew the lowest risk paired with the highest return. He chose the “rent by the room” to maximize cash flow which everybody loves. This was very important to him because he wants to continue investing in more real estate and felt the high cash flow would be crucial in speeding up the time until his next house hack purchase, even if it meant a little more work.

Did you work with any real estate professionals?

Lauren Valinoti with Envision Advisors

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

The deal was sourced from the MLS and Lauren was able to negotiate a $10,000 seller concession and used this to buy down interest by half a point with the rest going to closing costs.

How did you finance the deal?

3.5% down, FHA loan, 30-year fixed, 2.25% interest (wow!!).

Did you add any value?

Andrew added 3 bedrooms to the basement, plus one egress window and added some cabinet and shelf space in the kitchen to support the 6 bedrooms. Adding walls was much easier and cheaper than expected. Hired a contractor to do the work. All in, the wall plus closet cost about $1500 for each room.

As a 3 bed rental= $2400/month

Now, as a 6 bed rent by the room rental w/ the 3 new bedrooms added in the basement= $4,600/month

An additional $2,200/months off of a $5,000 investment. Very impressive!

What was the outcome?

The outcome is a high cash flowing rental that has been pretty painless to manage and has monumentally changed his personal finances for the better. He is now on the hunt for house hack #2 and looking to replicate the same tactics used for house hack #1. (Find a 3-4 bedroom SFH with some space to add additional rooms and creatively increase cashflow)

After moving out of this house, he will rent out the room he is currently occupying which will add an additional $800/month in cash flow.

Lessons learned? Challenges?

One concern going in was if he would be able to fill a 10 x10 room with shared bathroom. No problem there! He also learned that, due to the diligent upfront tenant screening process, having six people share one house is no problem.

One mistake made was not looking for tenants right after closing since he has quite a few renovations to do. In reality most people will start looking for new housing a month plus out so there really was no need to wait.

Furnishing:

If you notice in the picture below Andrew did a job furnishing the living area. When looking at the photo below, you can notice one key thing missing- a television! That's right! When furnishing the main living area when using the rent by the room strategy, do not provide a TV. This is a tactic created by Jeff White that encourages the tenants to stay in the room to hang out. Less tenant interactions, less tenant conflict. 

Great work Andrew!

When most of house hacking, they think buying a property with an ADU to airbnb/ rent out or buying a duplex, living in one end and renting out the other. We rarely hear about "rent by the room" which I think is one of the most recession proof forms of HH'ing out there.

I want to highlight Ryan Lind's first house hack that is crushing it! Ryan purchased a 4 bed/ 3 bath SFH in Arvada, CO back in November of 2020. What I really like about Ryan's story is that, even though he ran into some challenges right out of the gate, having the right mindset goes a long way when going through your first investment property.

Investment Info:

4 bed/ 3 bath SFH in Arvada, CO

Purchase Price:

$475,000

Cash Invested:

$17,000 + $2,500 in furnishings

$19,500 TOTAL

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

Ryan wanted to live for free by buying a 4+ bed home and renting out 3 of the rooms while living there. After moving out, rent out the 4th room and have a cash flowing rental on a low down payment/low interest loan. This property was also recently renovated so required low to no upfront repair costs.

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

The deal was right off the MLS. Using an investor friendly lender, he was able to offer a 14 day close. With the combination of the "quick close" and the listing being on the market for 30+ days, Lauren was able to get Ryan under contract $15,000 under asking and $5,000 seller credits.

Did you work with any real estate professionals?

Lauren Valinoti with Envision Advisors

How did you finance the deal?

Financed the deal with a conventional 30 year fixed mortgage with 3% down, 2.75% interest.

What was the outcome?

Beside some speed bumps early on, Ryan found massive success with this rental. By using shorter lease terms 6 months, he was able to capture market rental rate increases and raise rents 30% just in the first year while seeing 20% appreciation!

While living there, the mortgage (PITI) is +/- $100/month including reserves for maintenance (5%), vacancy (5%), and utilities. See spreadsheet images below

By decreasing his living expenses while house hacking, he is actively looking for HH#2

Lessons learned? Challenges?

What I really like about Ryan’s story is how he handled the speed bumps early on in this investment.

After closing, Ryan started listing his rooms for rent as quickly as possible on FB Marketplace, Craigslist, etc. but his listing kept getting taken down immediately after posting. After digging into it more, turns out there was a scammer using his photos/address to set up fake listings. After a few phone calls and proof he was the true owner of the property, he was able to get listings posted and rooms filled

Shortly after filling his basement room with a quality tenant, there was a serious flood coming from the basement bathroom. As mentioned above, the home Ryan purchased was a flip. As we all know, some contractors are better than others. This particular contractor cut a few corners and did not install the plumbing correctly which caused the flood. Being the top notch landlord that he is, offered the tenant some discounted rent so they would not vacate.

Ryan sees everything he went through as a learning experience that he can use for his next property. Because the entire bathroom had to be redone, he now has contacts with a variety of contractors he can use later. His insurance covered most of the repairs, so it wasn’t a problem giving the roommate a break on rent. When he looks at the spreadsheet and sees the returns he’ll be getting from this house, he knows he made the right decision.

Ryan is currently working with Lauren looking for HH#2. We are excited to hear his future success story.

Excellent work Ryan!