Case Study – A Denver House Hack

Let’s analyze the strategy and numbers on one of my favorite types of deals – house hacking in a non-confirming duplex. Turning a single-family home into two separate units provides you so much flexibility in how you can cashflow the property and it protects you for market shifts. Creating two separate units allows you to rent-by-the-room, long-term rent one or both units, short-term rent a unit while you get a private unit, rent the entire unit, there’s just so many ways to slice it.  

The House & Renovation  

In this case study the investor purchased the unit as his second house hack. It was an updated house and ready to rent, but he decided to do a small renovation to turn this into an up/down duplex. His first house hack was a 6-bedroom, rent-by-the-room where he shared a living space, kitchen and laundry with 4 roommates. By separating the up/down of this house he was moving up on the comfortability scale to have more privacy and amenities. 

The house was 4 bed / 2 bath. After a $40,000 renovation he was able to add a kitchen to the basement and a second laundry unit to the first floor. Each unit was now completely independent and 2 beds / 1 bath.  

Like most good renovations it didn’t go as plan. The contractors worked slowly and didn’t always put out the best work and the sewer line leaked into the front yard and required a $6,500 spot fix. The client also had to replace the AC & furnace which cost him about $10K.  

You’d think after a bad experience with contractors and expensive fixes he’d be scared off from real estate investing, but one year after closing on this house, he purchased his third house hack and already has plans for investments #4 & #5 and plans to house hack every year until he “retires” in 2031.  

The Numbers 

He’s the reason why this investor will continue to house hack and invest in real estate, he’s cash flowing and owns appreciating assets.  

Purchase Price & Expenses 

Purchase Price  $475,000 
Down Payment (3%)  $23,750 (Closing Costs = ~$6k) 
PITI  $2,330 
Utilities  $300 
Total Expenses  $2,630 
A/C + Furnace  $9,800 
Sewer Spot Fix  $6,500 

Rent & Income 

Rent  $3,950 
Net Rental Income (Monthly)  $1,320 
Net Rental Income (Annual)  $15,840 

This investor’s first two house hacks have allowed him to move on to his next property where he’s living a little more comfortably. He’s not cash flowing as much on house hack #3, but he’s living in a much more comfortable unit while netting over $30K in his first two properties.  

Where are you in your house hacking journey? Looking to get started? Stuck between house hack #1 and #2? Reach out and let us know how we can help! FI Team agents have house hacked themselves and are here to coach, guide and mentor you to become a successful real estate investor!