Catchy headline, right? Believe it or not it’s possible. You’re home is the biggest day to day fixed cost most of us have, imagine for a moment that you didn’t have to spend 30% of your income just to cover your rent or mortgage? What would that do for your life?
There are different ways to go about doing it. The most common way? Make mortgage payments for 30 years and when you’re in your late 50’s or 60’s you now own your home free and clear! Congratulations! However, if you don’t want to wait that long or spend all that money there are some creative ways to get it done a whole heck of a lot sooner (note, I didn’t say easier!)!
My personal favorite (because we did it!) is to buy a multi-family (such as a duplex, triplex or fourplex) and rent out the other unit(s). You need to get a pretty good deal to actually live for free with a duplex, but it should be pretty doable with a triplex or especially a fourplex. Another thing? Even if you aren’t free you’re going to be living for pretty dang cheap, this isn’t an all or nothing deal guys. A few hundred bucks sure beats $1200-2500 most others are paying!
That’s a big blog post on it’s own I want to tackle at some point, but it’s not what this one is about. I can understand not wanting to live in a multifamily, whether it’s space limitation, you’ve got kids, you have friends to impress, a mental hurdle, whatever. So if that option isn’t good enough, what if I said you could buy a single family home and get someone else to pay for it for you? Well listen up because there’s a house on the market that you could do that exact thing with! I’ve been trying to find a buyer for it for weeks now (if that buyer is you, call me 253-514-5592)
- $650k Preapproval
- Willing to live in a 1200 sq ft, 3 bedroom, 1.5 bath
- Willing to work hard, make a bunch of money and learn a ton about Real Estate (I’ll help!)
Okay here comes the meat and potatoes. The home is a roughly 1200 sq ft home on 0.8 acres. 1 car garage, split level and it’s a fixer upper, listed for $300k and if it were fixed up I would peg it around $330k to $350k (i.e. not a good deal).
Click HERE to view the listing.
However, there is one detail you may have glossed over, it’s 1200 sq ft and it’s on 0.8 acres! This presents a unique opportunity because in Pierce county any lot zoned for a single family home has the ability to build an ADU (additional dwelling unit; think mother in law, airbnb, guest home, etc). In urban pierce county, you’re limited to 1000 sq ft for your ADU, but in rural areas (crazy enough, the government still sees Gig Harbor as a rural area) you’re able to max out at 1250 sq ft. You’re also able to convert a primary residence into an ADU. SO, this got me interested.
Upon further investigation, the lot is 103′ x 331′ and there is only a 4′ change in elevation between it’s highest and lowest points over the length of the property. In addition, the existing home is located on the first 3rd of the lot. That’s a buildable lot!
I’ve marked on the image above the required 30′ rear setback required for the rural R-10 zoning on this property. Technically you could build closer to the structure as ADU’s have smaller setbacks, however it isn’t necessary and there’s an added benefit to treating it as a standalone structure I’ll touch on later. However, this leaves a 191′ x 103′ lot (equivalent to 0.45 acres) ready to be built on! Due to set backs, your buildable zone would be 136′ x 83′ allowing for just about any home you wanted to be built on it.
You can view the setback table at the pierce county website HERE.
One of my personal favorites is the Lincoln floorplan by Adair homes, so moving forward I’ll be using that as my example.
Click HERE to see the floorplan.
This home baselines around $228k (at 2541 sq ft, that’s about $90/sq ft!), according to Chris Josephson at the Silverdale Adair Office, your typical buyer ends up putting around $30k – $50k in upgrades so a final home will end up costing around $280k. Similarly, to develop a level lot, a conservative estimate lands around $50k – $70k, so you’re all in on your new home for around $350k!
So what does your $650k buy you? A 2500+ sq ft new construction home with a 1200 sq ft ADU on a private 0.8 acre lot in Gig Harbor. I mentioned the 1200 sq ft ADU is a cosmetic fixer, I’ve estimated 30k would get you where you need to be with new flooring, paint trim, etc. Because the home has been listed for 145 days without an offer as of the time of this writing, I would try and negotiate that price off the purchase.
If it were me, I would rent out the new home, expecting around $3000/month. You would find high caliber, professional tenants at that price point and as the owner, you could live in the ADU. $3000/month would cover principal and interest on a $600k mortgage at 4.5%; so if you could put down 10% you’d be able to have your mortgage entirely paid for.
If you could put 25% down ($163k) and could purchase it as an investment property, you could rent the smaller unit for around $1500/month with $2500/month going to principal and interest, throwing you around $2k/month after mortgage for both rentals (this doesn’t include taxes and insurance, which I think could easily cost around $700 – $800/month for both structures).
You would also have a valuable property. I think the 3700 total livable sq ft should fetch you above $800k, but if you were to short plat the property (which is why I suggested treating the ADU as a standalone structure) you could be well above that figure if you sold each property individually.
This is basically an investment deal on a silver platter, however all of these numbers are educated estimates, I would need a buyer to warrant a further investigation. If you’re interested in learning more, give me a call or shoot me a text! My passion is figuring out what the highest and best use of a property is by using creative ways to increase the value. I’d be more than happy to dive deeper into this idea, whether it’s with this lot or looking for another with the same strategy.