Behind The Scenes: House Hack
Buy a house and get your tenants to pay for it!
A few weeks ago, I went to look at a property which would have made an ideal candidate for a duplex conversion. It was a great price for the house, the basement already had a separate entrance, and it needed some cosmetic work without being in too poor of condition — all things I look for in any investment property. I liked it so much I very nearly bought it myself. A client of ours at Flux Realty thought the same and he just closed on the property a few days ago. In this article, we’ll go through the thought process behind selecting the property as well as the initial work we’ll put into it to turn it into a money-making asset.
My initial concern with the property when I first saw it was that the basement bedroom didn’t have a window. That meant we would either have to dig in a window through the foundation wall where the existing bedroom was, or put up a wall to build a bedroom adjacent to the existing window. (skip to 0:35 in the video above to see a visual explanation) Either way, that would be the most expensive part of the renovations needed up-front.
To clear this hurdle, Kieran made the smart move of living in the basement himself. So rather than having to retrofit it for a tenant, he is able to put off those expensive repairs and start earning money from tenants right away by focusing on more budget-friendly renovations on the upper level.
Since closing, we’ve been helping Kieran with finding tenants, and making some cost-effective renovations to the upper level of the property. By focusing on low-cost, high-impact renovations like paint, trim, doors, and some vinyl flooring, we were able to transform the image of the home on a shoestring budget and maximize the return on renovation budget.
For a more detailed look at which renovations are the best bang for your buck, check out this article I wrote a few months back.
The best part of this house hack is that because it’s Kieran’s primary residence, he only had to put down 5%! Most banks want 20+% down for income properties but by using his primary residence as an income property, Kieran was able to get the benefits of both primary residence financing as well as rent income.
By renting the place out for around $1700–$1800, Kieran’s mortgage will be more or less covered by the tenants so he will be earning equity and living for just the cost of utilities. What else can you ask for?
Andrew Baker is a Registered Realtor and Real Estate Investment Coach with a proven track record of leveraging the Four Unfair Advantages of Real Estate for his clients. Connect with his team on Facebook and fluxrealty.ca for more investing protips and 1-on-1 consulting.
