This analysis breaks down helping a first-time homebuyer and new investor to buy his first house hack. Our search focused on townhomes, since they have lower price points than detached homes. While he’s living there, the rent from two roommates ($850 each) more than covers his mortgage and HOA payments. He’s practically living for free! When he moves out after the one year mark, the numbers make sense as a rental property too. A solid win-win!
This property closed in Q1 2020.
Investor Profile
- Single young professional looking to start building real estate portfolio
- House hacking is the best method to reduce living expenses and minimize down payment
- After the one year mark, planning on buying another house hack and repeating
- Preferred townhouse because HOA helps with exterior maintenance
- Planned on utilizing FHA loan to minimize down payment
- Listen to the podcast "#151: Deal Analysis - Westminster Townhouse House Hack" on the Denver Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
Deal Quadrant: MLS
Read about the deal quadrant and finding Denver Investment Properties.
Investment Property Details
- Type: Townhouse
- 3 bedroom, 3 bathroom
- Location: Westminster – Highway 36 and Federal Blvd
- List Price: 279,900
- Purchase Price: $269,000
- Why we liked it:
- Great layout for house hacking
- Solid bones
- Basement bedroom, living room, bathroom
- Location works for client
- Move in ready
Property Contract Details
- Finding the property: On market over 30 days when we looked at it. It was overpriced and listing had gone stale. Great news for us!
- Under contract: Below list, secret sauce, and $6,000 in seller credits immediately.
- Inspection Concerns:
- None
- Inspection negotiation outcome:
- HVAC routine service
- Home warranty
Property Financing Details
- Lender: Conventional
- Loan Type: 3.5% down FHA loan at 3.375%
- Appraisal: Above contract price!
- Seller Concessions: $6,000, negotiated at time of purchase
- PMI: Monthly. No prepayment options since it’s FHA
- Interest Rate Buy Down?: Yes
Spreadsheet Analysis - After Move Out
Property Operating Expenses
First Year Returns
Conclusion
Our main focus when analyzing house hack and Nomad™ properties is from a rental aspect after the owner moves out. This analysis shows a negative cash flow, but remember we are calculating a 10% property management fee ($2,100/yr). He can self-manage to save money or rent all three rooms individually for total rent around $2,500/mo ($850 x 3 bedrooms) to make it cash flow (estimated $7,000+ a year!) Regardless of what option he chooses, it’s a great rental.
Video: Deal Analysis - Westminster Townhouse House Hack
Podcast: Play in new window | Download (Duration: 16:01 — 18.3MB)
Subscribe: Apple Podcasts | Android | Email | Google Podcasts | Stitcher | TuneIn | Spotify | RSS | More
