Today Faith Kae shares her small multi-family house hacking story from Statesboro, Georgia.
House Hacking Case Study
Faith is a Loan Assistant for the USDA Rural Development program. As a recent college graduate, she was interested in the idea of house hacking as a way to slash her expenses. In the past year, she took her time to learn more about house hacking. At the time, she was living with roommates in a college town for $400 per month.
The House Hack
In July 2020, Faith closed on her first property. She chose a duplex in Statesboro to be her first home. The best part is that she will be able to cover the entire mortgage with the help of her tenants.
Updating the Units
After closing on the property, Faith spent $14,000 to update the units with the help of the FHA 203K loan. She installed a new roof, installed a new HVAC unit, and added new carpet and paint to one unit.
At first, she is focusing on updating the tenant’s side of the duplex. But once she moves in, Faith plans to update the unit she is living in with vinyl plank flooring, repainted cabinets and new countertops. These updates will happen over time with the positive cash flow of the other unit.
When Faith closed on the property, she inherited tenants on both sides of the duplex. Unfortunately, she had to remove one of the tenants immediately due to the occupancy rules of the FHA loan. Although it was uncomfortable, she was able to make it happen. Plus, the other tenant has been very nice throughout the process.
The Numbers of the Deal
It’s time to find out exactly how profitable this house hacking strategy was!
Faith used the FHA 203K loan to finance this purchase. She was able to use $14,000 of the loan upfront to cover some renovation costs. She put down 3.5% on the loan with a 3.25% interest rate. That led to a total monthly payment of $770.45.
Faith is able to charge her tenants $1,125 per month.
- Previous housing costs: $400
- Gross Rent: $1,125
- Mortgage payment: $770.45
- Cashflow before maintenance and vacancies: 345.55
- Total housing savings: $754.55
The cash flow of the property is cashflow positive. Plus, Faith is able to live for free! She would absolutely house hack again because this is the only time in her life when she has been able to live for free!
The Learning Curve
The overall house hacking process has been a positive experience for Faith. She plans to use her savings to save up for a new car and then another investment property.
However, she would change the details of her closing contract if she could go back in time. When she closed on the property, there were tenants in both of the units. Due to the occupancy requirements of the FHA loan, she had to terminate the lease of one of the tenants. If she could go back, she would make the seller remove that tenant before she took possession of the property.
Faith’s advice to anyone considering housing hacking is, “Do it! Make sure you can afford the mortgage whether you are renting out a space or not.”
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The Bottom Line
Faith’s story proves that house hacking is possible with some creativity! She will be able to reap the rewards of this decision for many years to come!
If you are interested in creating your own house hacking story, then check out our ultimate guide, listen to our house hacking podcast, or read more case studies for inspiration. You never know how dramatically your life can change through this one choice!