Let me premise this post with this: I am still a newbie to this whole real estate thing, and I’m not here to give you advice. I’m simply sharing my story with you.
One thing is for sure – there is no magical secret to what I’ve done. I worked hard, saved, and got a little creative!
By the way, I will use the term Househacking a lot. Househacking is a term coined by Brandon Turner of Biggerpockets.com which is the idea that you buy a property, live on one side of the property and rent out the other side. For single family homes, this means you rent out extra bedrooms to roommates. For multi-unit properties, this means you live in one unit and rent out the other units.
In early 2017, I found Biggerpockets. Later that year, my wife and I got married. And right away, we bought a 2 bedroom, 1.5 bathroom condo in a very desirable area on the north side of Chicago right off of the lake.
We bought it with a low-interest government (not FHA) loan that was available at that time. Sorry, I forgot what it was called. I was only required to put 1% down and on the day of closing, I was required to bring only about $5000 dollars to the closing table (if I remember correctly).
Our mortgage was only ~$500 bucks. However, our HOA fees were ridiculously high at ~$900 bucks. We also had to pay for parking, which was ~$130 bucks a month.
In retrospect, I can’t believe how much I was paying a month to live there. But, high HOA fees were very typical of the area. And so, my wife and I were paying close to $1600 dollars a month to live in a condo that was less than 1000 sq ft.
We realized very quickly that we needed to figure out a way to reduce our housing costs and entertained the idea of househacking. But, we didn’t want a roommate since my wife and I had just gotten married. So, we threw around the idea of short-term rentals since guests weren’t permanent. We decided to give airbnb a try and soon listed our 2nd bedroom on Airbnb. Long story short, that room brought in an extra ~$700 dollars a month almost reducing our housing costs by half. We caught the bug!
In mid-2018, we decided to sell our condo and buy a duplex so we could take househacking to the next level. We found a duplex in a suburb of Chicago called Niles. It needed extensive work (new electrical, A/C units, water heater, furnace, etc.). We decided to purchase the property using the FHA 203K loan, which is a renovation loan that allows borrowers to put only 3.5% down and also include the renovation costs into the loan. All in all, I brought only about $15K to closing to purchase a $385K property. For financing, we had to get creative. We used a combination of savings and 401k funds to come up with the down payment. What’s nice is that my 401k account allows me to borrow against myself which I can repay myself with interest.
Per FHA guidelines, all of the big renovations were taken care of by the contractors. After the loan closed, my wife and I took on different rehab projects that weren’t performed by the contractors. We renovated the kitchen and bathrooms and laid new flooring throughout. We took care of minor electrical and plumbing issues. We did some drywalling, mudding, taping, and painting.
Finally, by mid-2019, all of the renovations were done.
After doing some research, we realized that we could bring in more income by renting by the room instead of the entire unit on our 2nd unit. We got all 3 bedrooms rented to long-term tenants at $700 dollars a month. In our unit, we lived in one room and rented out the other 2 bedrooms on Airbnb which brought in about $1200-$1400 dollars a month. In total, the property brought in about $3300-$3500 dollars a month. Our monthly mortgage (PITI) was about $2800 dollars. In 2020, we moved out and also rent out our room, which brings in an additional $700 dollars a month. Not bad!
And this year, we closed on our 3rd househack. We moved into another duplex with a fully finished basement. We currently live in the 1st unit, rent the bedrooms to long-term tenants in the 2nd unit, and Airbnb the bedrooms in the basement. For financing, we tapped into my wife’s 401k account where she borrowed funds against herself and will eventually pay herself back as I did. Also, for closing costs, we negotiated a way for the sellers to cover them. This way, we were only responsible for the down payment. More of this to come in a later post. Our monthly income is somewhere around ~$3500 on a $3000 mortgage. Again, not bad!
As I stated earlier, there is no magical secret. We worked incredibly hard for the past 3 years. On many days, we would work our regular 9-5s and then from 6pm-midnight, spend the time rehabbing, furnishing, analyzing properties, and studying real estate. I don’t remember a weekend when we actually had a day off. Even on rare vacations, we’d always think about real estate or rehab projects.
We also had to get creative. We had to Airbnb a bedroom in our small condo. We then had to rent by the room and Airbnb other rooms in the 2nd and 3rd properties. We also had to get super creative financing wise.
Sure, househacking isn’t always easy. Sharing spaces with others isn’t always comfortable. Constantly cleaning and turning over bedrooms for our next Airbnb guests isn’t always fun.
However, it’s really not THAT bad! It’s fulfilling to see tenants and guests enjoy the space that we have created for them. It’s satisfying to see the rent checks come in every month and the Airbnb direct deposits hit our bank accounts.
But, more importantly, my wife and I have a vision. We believe it’s a vision given to us from God. We believe that real estate will give us more freedom and time to pursue more meaningful tasks in the future. And we are willing to sacrifice our comfort now, so we can have the life we want later!
Isn't Gee So Lovely 