#486: House Hacking Strategies that Achieve Above Market Rent Deal Analyses

Denver Investment Real Estate

Are you having a hard time finding deals that pencil out in today’s market? Interested in learning more about the new 5% down payment option for multifamily homes? Join Jeff White and lender Troy Howell as they analyze two creative house hacks—a fourplex using the new 5% down payment and an 8-bedroom house hack that allowed the client to walk away from closing with a check. Don’t miss this chance to identify real deals that are working in today’s market!

https://youtu.be/kbWgrcVkLHM

(04:00) Deal #1 – House Hack Fourplex with 5% Down Payment
(15:49) Deal #2 – Rent by Room House Hack
(27:40) FAQ’s about Denver deals

Deal #1: House Hack Fourplex with 5% Down

Client was looking for the best situation for him and his wife to start house hacking, and the client was open to 2-4 units, so that they would have their own unit to themselves while renting out the other units, and they were pre-approved for $600k-$1 million for 2-4 units.

Investor Profile:

• Investor couple with one townhome
  • It wasn’t a house hack
• Wanting to purchase a new house hack in 2023
• Looking at 2-4 units to get privacy and house hack
• Open to most locations in Denver metro
• Wanted a 4 plex

Investment Property Details:

• Type: Fourplex Multifamily property
• Config: 4 units – 2 bedrooms and 1 bathroom per unit – 8 beds/ 4 baths total
• Location: Arvada, CO
• List Price: 800,000
• Over Asking Price: 810,000
• Concession: 10,000 to buy down the rate and pay off closing costs
• Why we like it:
  • 5% Conventional Loan
  • 10k Seller Credit to buy down interest rate
  • New roof from inspection to lower annual property insurance
  • 2 out of 4 leases were MTM, so lots of flexibility with one unit vacant and one term lease that ends next year, so gives time to work with existing MTM tenants and plan for next year’s tenant
  • Arvada location close to Costco and Wadsworth Blvd, so easy access to highways and major streets

Rental Analysis Living There:

Conclusion:

• It appears to be a negative cash flowing property
• Basically paying $2,435 per month to learn to be a self-manager and stabilize the property
• Business plan to is work to increase the other two units to Section 8 market rents in the next 3-6 months or soon

Rental Analysis Living There and Stabilizing Two Units:

Conclusion:

Once you replace two MTM tenants with Section 8 from $1,200 below market rent to $2,201 Section 8 rents, it now makes it only $634 per month to live in this fourplex and that’s still with one term tenant at $1,250

Rental Analysis After Moving Out:

Conclusion:

• This is why you look at both living there and after moving out for house hack properties
• This deal is amazing at all the metrics by switching to Section 8 rentals
• Cash on Cash return is way above average
• This deal works great as a house hack because you get your own unit

Deal #2: 8 Bedroom RBR

Client was looking for his 2nd House Hack property, and he was looking for a large single family value add property that he can add bedrooms and a bathrooms to maximize the rent by room strategy.

Investor Profile:

• Married Male with one child
• Looking to rent out the 4 bedrooms in basement
• He wanted to have 3 rooms upstairs for his family
• Didn’t need to cash flow as much while living there
• He was ok with rent by room strategy to get higher cashflow

Investment Property Details:

• Type: Single Family House
• Config: 8 bedrooms and 3 bathrooms (originally 5 bedrooms and 2 bathrooms)
• Location: Westminster
• Price: 520,000 (Appraised at 532k!)
• Purchase Improvements needed:
  • Adding bedrooms and bathrooms improvements with seller credits
• Financing:
  • Nova Home Loans and CHFA Loan
• Why we like it:
  • Value add potential, great parking and location close to so many things
  • Great HVAC, Water Heater and new roof, gutters and sewer line
  • Clean property that shows well
  • Great second house hack

Rental Analysis While Living There and Renting Out Basement:

Conclusion:

• Client didn’t need the extra cash flow due to wanting more privacy
• He was ok with just managing 4 tenants in the basement as long as he had the upstairs for himself for the next 6-12 months
• He vacated his other property, so his NET NET after moving out and adding this negative cash flow was break even, so he is still growing his portfolio

Rental Analysis After Moving Out with 8 bedroom RBR:

Conclusion:

• After he moves out, he will be able to cash flow extremely well on a 7.375% interest rate property
• He will be cash flowing almost 20k per year
• He is willing to rent to with 8 rent by room tenants, and it is more work = more return
• Since he was only into the property for basically $2,000, he will be able to save for the next year even faster, the velocity of money
• Rent by room is an amazing strategy that yields higher than average cash flow
• Client will have HH #1 Cash flowing over 1k per month, and with this one, he will be hitting almost 3k per month in cash flow

Links from the Podcast

Nova Home Loans: https://troyhowell.novahomeloans.com

Email Troy Howell: [e-mail]

• LinkedIn: Troy Howell
• Instagram: Troy_howell_loans
• Facebook: Troy Howell

Email Jeff White: [e-mail]

• LinkedIn: Jeff White
• Instagram: @8tofire

Who is Nova Home Loans

For over 40 years, we’ve been focused on helping homeowners find the perfect loan to fit their financial needs and personal goals. Working with NOVA is a personalized experience from initial application to final loan closing and beyond. We will be with you every step of the way toward successful homeownership. Start working with NOVA & Troy Howell today!

TROY HOWELL NMLS #311477 | 720.279.5929 *The information contained here is educational only and does not represent actual savings, rates, or financing terms.