“If you want to be disciplined about something, then you need to make it your identity” –Nikhil
If you’re going to buy your first house right out of college, you need to break the norm
that houses are for married couples, with kids, oh and that white picket fence. It might
be daunting to be “unconventional”, especially if you have more conservative minded
parents. BUT, if you know your WHY and can dive into the identity of a real estate
investor, then you have an opportunity to make substantial wealth at a young age.
Back Story:
This client began researching real estate investing when they were in college via social
media, YouTube, BiggerPockets and books. He used that time as discovery to
determine what investing strategy made the most sense to him, BRRRRs, flips, etc. Of
course, in the end he landed on house hacking.
Like most 22-year-olds, he didn’t have the means to buy a house, so he chose to live at
home for 2 years while he saved 90% of his income working in cyber security. In this
time of saving, he interviewed lenders and got pre-approved to buy. He then began to
interview agents.
He was following a plan.
The Search:
At first the client wanted to look at properties they could turn into an up/down duplex. It
was appealing to have their own private space, but after getting quotes for a remodel to
add a second kitchen they didn’t want to put up the funds and become house poor.
Their agent pitched them the idea of a rent-by-the-room house hack, which after
crunching the numbers was much more appealing.
The Offer:
Note: the next part of the story is why you should make sure you’re working with an
agent who knows what they’re doing!
The house they went under contract with had been on the market for 30+ days with over
$80K in price cuts. Why? It was a 5 bed/3 bath house with 2,100 sq. ft. but it was listed
at a 4 bed/ 2 bath house with 1,100 sq. ft. The listing agent didn’t include the square
footage or rooms in the basement!!
This property was overpriced for 1,100 sq ft, but a total steal and perfect layout for the
buyer.
Using a CHAFA loan, here’s the deal breakdown:
Offer price: $542,000
Seller concessions: $12,800
Purchase Price: $529,200
Down payment: $20,000
Rehab & furnishings: $14,000
ARV: $560,000
PITI: $4,050
Income: $5,200
Cash-on-cash return: 9.23%
Kitchen Photos Before & After
What’s Next?
This buyer is already preparing for deal #2. He’s investing everything he can back into
this property and the next deal. He’s putting the reserves, plus an additional $600 from
his W2 into the house fund plus investing additional earnings into a separate account to
purchase the next property.
Not all clients go into investing with a plan. But, if you’re a planner, this is an excellent
strategy to try.
