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“Instead of just leaving it the way it is, why don’t I put my money into increasing the property value by just adding another bathroom.”
Watch the episode on the House Hacking Doctor
The Famous Six
What is your favorite personal finance resource?
Rich Dad, Poor Dad and The Dichotomy of Leadership by Jocko Willink
What is your favorite real estate resource?
Semi-Retired MD, Bigger Pockets, and The House Hacking Podcast
What has been your favorite travel destination so far?
What is the biggest bucket list item you haven’t accomplished yet?
He wants to learn Spanish
What is next on your travel list?
What is your favorite life hack?
Making a Google calendar the week before for the following week and time blocking
Discussed In This Episode
- Educating Self Financially
- Choosing a Fourplex Instead of a Single Family Residence
- Forcing Appreciation
- Renovations and Raising Rent
Doctors spend so much time learning about medicine but not about personal finance. Many doctors live paycheck to paycheck.
Ayush attended a virtual summit of physicians with other streams of income where he discovered Letizia Alto and Kenji Asakura’s course, Semi-Retired MD. Taking the course he realized real estate investing would lead to financial freedom.
The impact on COVID and seeing his fellow doctors with 20+ years of experience not being able to pay their mortgages because of reduced hours was a big factor in choosing to invest in real estate vs buying a house.
Ayush’s House Hack
Because the course didn’t talk about house hacking, Ayush learned about house hacking from Craig Curelop’s book, The House Hacking Strategy. He planned to buy a duplex but in May 2020 a lender offered him an owner-occupied 0% down, $750,000 loan for up to 4 units without PMI (private mortgage insurance).
The duplexes he was looking at were in an expensive area and even with house hacking, he would still have to pay rent. Ayush’s goal was $0 living cost so he bought a 4 unit property because it was better financially.
His top/bottom 4plex is a historic home in an “A” class neighborhood in the Garden District of New Orleans. The bottom units are New Orleans shotgun-style design. It was listed at $695,000, he paid $690,000. Despite a competitive housing market, Ayush status as a pediatric emergency room physician with a pre-approved loan and papers from the bank helped secure the deal.
During the inspection, it was revealed that the house needed $45,000 in repairs. The seller met Ayush halfway and reduced the price by $25,000.
But because of COVID, the banks were tightening up loans and canceled his physician’s loan. So Ayush got an FHA loan instead.
All 4 units were 2 bedroom, 1 bath, and had long-term tenants paying below-market rate. Three of the units rented for $1,500 and the fourth rented for $1,375. The mortgage on the 4 plex was $4,500 a month.
He had to put $40,000 down (more than 25%) because, in New Orleans, the maximum FHA loan for a 4 unit property is $650,000.
Giving a Tenant Notice During COVID
Because FHA loans are resident occupied, Ayush had to give one of the tenants' notice. He chose the tenant who was planning on leaving in two months.
The first week of living in the house, one of his tenants’ bathroom ceiling collapsed because of a water leak.
After fixing the water leak, Ayush’s priorities were to appreciate the property so he could refinance and have 20 to 30% equity built up and add a second bath to all four units. Because rents for 2 bedroom, 2 bath units were $300 to $500 more a month.
He renovated and added a second bathroom to his unit in December. Because his 4plex has a three-inch crawl space underneath it made it easy for the plumber to add the second bathroom. According to Rentometer, his unit can rent for $2,200 to $2,300 a month.
Ayush’s Next Move
The tenant next to Ayush who was paying $1,375 a month recently moved so that unit is undergoing a $20,000 renovation. He’s advertising it to other physicians, residents, fellows, medical students, and nurses. Ayush plans to rent it for $1,950 or $2,000 a month.
For the remaining units, one of the tenants renewed their lease and the other tenant is moving out. Once they move out, Ayush will add minor bathroom and kitchen renovations and keep that unit as a 2 bedroom, 1 bath and rent it for a little more than $1,500.
Ayush plans to refinance in the summer once all units are rented. Then repeat and buy more properties.
What He Would Do Differently & What He Did Right
He wishes he would have planned better. But feels he did a good job on getting the house under contract but wishes he had negotiated a higher discount after the inspection. Getting emotionally involved was also a hindrance.
Ayush knows he did the right thing by taking action and going through the learning process.
He chose to spend money on the Semi-Retired MD course because he didn’t know about Bigger Pockets nor have any friends who were in real estate.
Tip: Physician's Loan or Special Loan
Physicians and high income professionals can get a physician or special loan from lenders with 0% down.
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