Kendra and her husband completely changed their mindset about real estate investing and house hacking after a life-changing dinner party.
Meet Kendra
Kendra recently moved from Washington DC to Texas. Through real estate investing, she was able to leave her 9-5 through investing in real estate at 32. But she didn’t discover the power of real estate investing until she was playing a board game at a dinner party five years earlier.
Although the dinner party hosted by her aunt seemed like a normal outing, it turned into a life-changing day. Kendra and her husband discovered the power of passive income through the Cashflow 101 board game. After making the connection, Kendra and her husband decided to start looking for a rental property the very next day.
How Kendra Got Started In Real Estate
Before discovering the power of real estate investing, Kendra and her husband had bought a primary residence. Since they enjoyed living in that property, they decided to look for a rental property.
It took three months of searching to find a suitable investment property – a duplex with one bedroom on each side on the market for $228,000. Although it was a good opportunity to house hack, Kendra and her husband had not considered that option. With that, they had to make a significant down payment of $56,000 for their first rental property. The massive down payment required a loan from their retirement accounts.
After the big downpayment, the monthly mortgage on the property was $1,025. When they closed on the property, one side of the duplex rented for $1,100. With that, they were planning to renovate the other side before finding a second tenant. But the original tenant moved without any warning – leaving Kendra and her husband in the lurch.
Quickly, they decided to list both units on Airbnb. In the end, it was a great decision because they were able to bring in between $3,000 and $4,000 each month through Airbnb. After several years of managing their Airbnb, they decided to shift to long-term tenants when they moved out of state.
Kendra’s House Hacking Deal
The first deal went so well that the couple started looking for their next property. With the help of a real estate agent, they stumbled onto the idea of house hacking.
The idea of house hacking changed their search parameters as they sought out their next property. They soon found a four-unit property in a slightly better neighborhood for $800,000. But with the rapid gentrification of the area, they quickly saw the property’s value increase by $200,000.
Although this property was undeniably a good deal, Kendra struggled with the idea of moving into an apartment with tenants close by. After weighing the benefits of early retirement against the compromise of downsized living space, Kendra agreed to move forward. Luckily, Kendra and her husband moved into the largest unit with three bedrooms and a private entrance. Without that decision, Kendra says they wouldn’t have reached financial independence.
In order to close on the property, Kendra and her husband used an FHA loan, which allowed them to put just $20,000 down. At closing, three of the units were occupied by section 8 tenants. So Kendra and her husband moved into the vacant unit after remediating some mold issues.
At first, the units were bringing a total of around $2,000. But since the neighborhood changed dramatically, they were able to double the rental income with six months based on the market. With the new prices, they were able to bring in around $4,000 for a single unit.
The monthly mortgage on the property was $5,000 per month. The units were bringing in a total of $12,500 per month. That lead to a monthly profit of around $7,000.
Kendra’s Thoughts On Section 8 Tenants
When Kendra bought this property, it was filled with Section 8 tenants. Although they asked all of the original tenants to leave, they refilled the units with Section 8 tenants that they could run their own due diligence on. Since Section 8 will pay top market prices in DC, Kendra and her husband were happy to accept these tenants.
Kendra shares that screening your own Section 8 tenants is a good way to find great tenants that will pay on time. However, she found it difficult to establish a positive relationship with their tenants who were used to less helpful landlords.
In order to create a positive tenant relationship, Kendra and her husband drafted leases. At his day job, Kendra’s husband regularly drafts contracts, so drafting a solid lease was not a challenge with the help of an online template.
If you are looking for help with a lease, check out EzLandlordForms. You’ll find customized leases at an affordable price.
Kendra’s Next Move – Financial Independence
After living in their house hack for a year, Kendra and her husband moved to Fort Worth, Texas for a job opportunity. While in Fort Worth, they realized they had reached financial independence. This was due to their new spending habits which allowed them to purchase even more rental properties.
Once they quit their jobs, they planned to travel the world for a year. But changed their plans after they found out they were pregnant. Instead, they decided to move to San Antonio to be closer to family.
Looking back, Kendra wishes they had house hacked before buying a single-family home. Additionally, she wishes they had been aware of the down payment assistance programs that could have helped them stretch their funds farther.
The Famous Six
What is your favorite personal finance resource?
What is your favorite real estate resource?
What has been your favorite travel destination so far?
Costa Rica
What is next on your travel list?
Germany
What is the biggest bucket list item you haven’t accomplished yet?
Skydiving
What is your favorite life hack?
Make money without exchanging time for it
Book mentioned in this episode
How to Connect
Connect with Kendra on Instagram @thekeyresource.
Resources:
- House Hacking Learning Modules – fibyrei.com/learn
- Cashflow 101 Board Game
- ezLandlord Forms
