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    Cash Flowing In The Bay Area?!?! How?!

    Living in the Bay Area can be expensive, so how did Daniel and Maria take the first steps to building wealth?

    Keep reading to find out how house hacking, short term rentals, and rehabbing all came together in ONE property!

    Daniel and Maria purchased their beautiful home in Concord, CA with The David Greene Team. Let’s do a quick recap of their investment.

    1. They purchased a 2 bed/1 bath with a detached studio.
    2. Below the studio, there’s a basement that they are planning to convert into another studio.
    3. They live in the 2 bed/1 bath and currently rent out the back studio as a short term rental, netting them $3k a month!
    4. Once the basement is converted, they will net approximately an additional $2k a month.

    The Purchase Numbers

    Daniel and Maria worked piece-by-piece to come up with their key metrics when analyzing their deal!

    Daniel and Maria purchased their home for $750,000. Since this was their primary residence (aka owner occupying the property), they were able to use a low down payment of only 5% ($37,500). Their total closing costs were $6,000 for a grand total of $43,500 out of pocket.

    The Expenses

    Each month, Daniel and Maria will have a total of $4,800 in expenses. That includes their monthly mortgage, utilities/operating expenses, and maintenance/repairs. Once Daniel and Maria identified this number, they had one of their most important target numbers moving forward. Now they had a solid number to use while they considered different strategies that would help them cover these expenses!

    The Cash Flow

    This is the type of cash flow Daniel and Marie will be earning once they finish their third unit and eventually move out so the entire property can produce income. This income will allow them to continue building their portfolio.

    By working through their investment in phases they’ll be able to work up to their total cash flow metric.

    1. Phase 1- Live in Unit 3 while Unit 1 is utilized as a short term rental (continue renovating Unit 3)
    2. Phase 2- Live in Unit 3 while Unit 1 and 2 are utilized as a short term rental or medium term rentals
    3. Phase 3- Move out of the property. Rent ALL units.

    Let’s check out the final numbers! Year 1 rental income is projected as $62,400/yr with a 143% Year 1 Return On Investment. Once Daniel and Maria move out of the property and onto their next house hack, they’re projected to cash flow $28,800/yr with a 66% Move-Out Return On Investment.

    Turbulence

    Like any adventure, there was turbulence along the way. Daniel and Maria hit a few bumps but did not let it deter their plans.

    -Daniel and Maria tackled the rehab on their own but underestimated the time needed to complete their projects. They were able to keep pushing ahead by remembering the money they saved by completing the projects themselves.

    -The short term rental had to be delayed so the garden could be updated. Daniel and Maria were able to stay the course by remembering with an updated garden they would be able to charge a higher rent in the end.

    Wrapping It Up

    Daniel and Maria learned a few key lessons including that DIY can pay off big time and diamond in the rough properties can be often overlooked due to the fixes that are needed.

    We’re so happy for Daniel and Maria as they will be living for free on their purchase and they will be able to continue to build on their real estate portfolio! 

    If you’re looking to invest or get started with house hacking, like Daniel and Maria, make sure to reach out to The David Greene Team!

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