Lane Kawaoka is a former engineer that has leveraged real estate investment portfolio into a profitable income stream. On his path to this great success, Lane took advantage of a roommate-style house hacking opportunity that allowed him to supercharge his investment portfolio.
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Here's how Lane used house hacking to start investing in real estate.
Lane's House Hacking Case Study
Lane first thought of the idea of housing hacking after talking to a former landlord. After deciding that it was a good idea for his situation, he took his savings to purchase a single-family home.
At the time, Lane was renting in the Seattle area. Although he had built his savings through frugal habits, he was ready to stop paying rent every month.
The House Hack
For his first real estate property, Lane bought a class A single-family home. Lane had the goal of living in one of the rooms and renting out the other spaces to cover his housing costs. Lane closed on the house in 2010. When he moved in, he did not need to take care of any renovations to the home. Instead, he was ready to move in and find roommates immediately.
Lane used a property manager to find and manage the tenants at his properties.
The Numbers of the Deal
It's time to find out exactly how profitable Lane's house hack really was!
When Lane bought the property, he used a Fannie Mae loan with a 5% interest rate.
With that financing, the total monthly cost of the mortgage was $1,600. That includes all principal, interest, taxes, and insurance on the property.
With the financing offset by rental income, Lane was profiting $500 per month.
Let's take a closer look at these numbers:
- Gross Rent: $2,100
- Mortgage payment $1,600
- Cashflow before maintenance and vacancies: $500
Not only was Lane able to save money on his housing costs, but also make a profit on the property while living in a nice home.
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The Learning Curve
After going through the process of house hacking, Lane wishes that he had bought something other than a Class A property. He would have likely made more profits with a lower class property, but he doesn't regret his decision to get started.
The house hack was a way for Lane to build investment capital. Soon after buying this property, he started buying turnkey investment properties. Currently, he owns 3,500 units. The stepping stone of house hacking was a big part of making his large investment portfolio a reality.
Although Lane wouldn't consider house hacking as a viable option now, it was a great way to start building his real estate portfolio.
Get In Touch
You can find out more about Lane's success story on his website, Simple Passive Cashflow. He shares more about his real estate investment strategies there.
The Bottom Line
Lane's house hacking case study shows that it is possible to start your real estate investment portfolio with this strategy. With the savings Lane created, he was able to work towards a large investment portfolio.
Be sure to check out next week's house hack case study with Ryan.
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!
If you choose to pursue a house hack of your own, then please share your story with us! We would love to showcase your success.
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