Carly C on Denver Metro House Hacking
Carly and I meet downtown mid-afternoon. She looks so happy but admits to being tired; work has been hectic, she says. I laugh because when she says “work” I know she’s referring to her regular 9-5 job, her weekend job and the two rental homes she purchased in the last year and half. For many, it might seem impossible but to Carly, it’s just another day on the path towards her financial goals.
Despite her drive today, this path wasn’t always crystal clear. In fact, her trajectory shifted quite suddenly about two years ago when she was randomly exposed to the concept of “House Hacking” through her partner's family.
Testing strategy for herself
House Hacking is a real estate investment strategy using one’s primary residence that generates cash flow beyond covering an owner’s expenses. A perfect example is one Carly observed; her boyfriend’s sister and her husband purchased a home, rented out all other bedrooms aside from their own, covered all monthly expenses from the rent collected plus some extra cash. After one year in the home, they’d rent out their room and buy another home to repeat the process.
By acquiring properties, renting as many rooms as possible, and moving every year, they created new revenue streams annually. Simultaneously, they reaped the benefit of mortgage products only available for primary residences by making sure to live in each home for at least a year. Their strategy was further enhanced (if you can believe it) by a particular loan product; the Home Grant Program by Bank of America.
The BOA Home Grant Program is an important factor in the equation so don’t expect to try this strategy with a regular investor loan. Incredibly, this nation-wide program helps both first AND second-time home buyers purchase a primary home by providing grants towards a down payment (3% of the home purchase price up to $10k) and closing costs in the form of a $7,500 lender credit. To be eligible, Carly had to find a home in a specific area outlined by the program, meet an income limit, have a credit score over 620, and take a required course. For more details on the requirements, see the fact sheet here.
Armed with a product like this, acquiring a home became much more approachable and enticing. Essentially, if Carly met the requirements, she’d get approved, owe a small down payment, rent out as many rooms in her new home as possible and earn money every month. She was instantly sold.
Diving in Head First
In true Carly nature, she kicked off her home search immediately with the help of a very knowledgeable realtor and went under contract within 24 hours! Upon closing, Carly walked away with keys to a new home after only investing $3,000 of her own money.
Carly is obviously motivated and efficient at decision making, which is a huge contributor to her success, but she also had to find the right fit for her when it came to an investment strategy and take action. House hacking proved to be an ideal fit for her lifestyle plus she was willing to put in every ounce of effort to make this opportunity a reality.
As a first-time home owner, she got right to work posting the available bedrooms on Facebook Marketplace for rent. She wrote a lease and filled three bedrooms within 20 days. Then, with the help of her partner, she remodeled an open space in the basement into two additional bedrooms. Because of course, more bedrooms equals more income. Done.
After installing new walls and doors, her five bedroom home was ready for four tenants plus a room of her own to share with her pup. She settled in and quickly found that going from living alone to living with so many roommates was difficult. But, since all leases started with a short, 3-4 month lease term, she was able to see if the new tenant was a good fit for the space. If they weren’t, or if they were messy, noisy, or disrespectful, their lease would once again be available online for a new renter the next month.
Initially it was difficult to furnish the common areas, decide and enforce the house rules, and learn the rhythm of not only living with roommates again but also being a first time landlady. Luckily she had the help of her partner’s family who were miles ahead of her and always willing to help.
Her home quickly started generating $700/month on top of covering all other expenses. She began living for free and saving the entire $1,300/month that would've previously gone to rent. Miraculously, the initial investment was paid off in three months and she was generating enough extra income to start saving for her house hack number-two.
Fast forward through 11 months in the home, a requirement of the BOA program, Carly was ready to repeat the entire process. Alongside her realtor, she found her next property and followed her original footsteps to become a second time homeowner, this time on a 5 bedroom property.
Acquire property, check.
Add one more bedroom and a bathroom, check.
Line up five new tenants, check.
Maintaining Momentum
Focused on her goals, Carly held on to her full time job managing a team in the non-profit world in the background amidst it all. She even found the time to look at her financial goals more holistically. As organized as she is, she plans to keep the pace on home acquisition, keep her 9-5 job as long as possible and continue supplementing her savings with part-time work on her weekends doing brand promotions. With the increase in monthly income, she opened an investment account online and began building a portfolio through traditional investing too. It’s hard not to be impressed by her!
Equipped with a powerful strategy, a good team, and a willingness to put in the time, Carly has the formula for success. While her path is fast paced and tiring, her desire for freedom and early retirement makes it worth it. Ultimately, she dreams that it will enable her to buy property in Colombia and adopt a slower lifestyle in the coming years. By all accounts I believe she has the building blocks for everything she wants in the future.
