Lakewood (Belmar) House Hack – Case Study

This case study was discussed in the February Monthly Roundup.

Property Details:

  • 5 Bedroom
  • 3 Bathroom
  • Sold Price: $441,000

There were lots of reasons to like this house and it actually ended up being one of the first houses that this client looked at. While we don’t like to rush someone into a buying situation this was an excellent opportunity for a house hack. Beyond having enough bedrooms for the house to have great cash flow the floor plan also has multiple non-living spaces to make living with multiple people more comfortable. As it stands the downstairs has 2 non-conforming bedrooms that only need egress windows to make them confirming bedrooms (The owner is putting them at about $3k each.)

The lower half also has its own entrance, washer and dryer hookups, along with a kitchenette. The home overall needs only a little bit of sweat equity to really maximize the potential rents. This home also had a few additional areas to boost cash flow, there are 2 sheds and RV parking on the property. The buyer had no plans for either and could rent them out to neighbors who are short on space.

The negative annual cash flow that stands out here should be taken with a grain of salt. This home is also going to be the primary residence of the buyer. He plans on living on the top floor and using 1 of the 3 rooms as a home office. He should conservatively be able to rent out the lower portion of the house for $1,400 per month. In the end they get a private 2 bedroom house with a home office for less than $1,300 per month. They will also be building equity in the home and will receive all of the tax benefits of owning a home.

Once the owner does decide to move out they should have no trouble receiving positive cash flow from the home. At $3,000 per month the property would yield roughly $2,100 in annual cash flow. While this may not be a life changing number remember that the buyer only put 5% down on the home. He is also on a fixed mortgage, so their costs will remain the same but we can expects rents to steadily rise over time. This purchase will end up being a great long term wealth building asset.

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Authors
Chris Lopez
Chris Lopez is a Denver area real estate entrepreneur and investor, as well as the host of Bigger Pockets’ House Hackerz and the Denver Real Estate Investing Podcast.
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