Peter Keane-Rivera has specific criteria when he shops for investment properties.

The Seattle-based millennial, who supplements his engineering salary with rental income, looks for large homes — at least 3,000 square feet — with unfinished basements, which give him room to add value.

His strategy is to buy and hold long-term rentals, then rent them out by the room.

"The more rooms, the more cash flow," Keane-Rivera, who has 19 units across three properties, told Business Insider.

He opened the books on his latest acquisition: a roughly 100-year-old, 3,900-square-foot house in Kent, Washington. Business Insider reviewed mortgage statements confirming his ownership of the property. Keane-Rivera converted it from a five-bedroom home into a nine-bedroom rental that generates about $2,500 a month in profit.

The deal: $630,000, negotiated down from $665,000

Keane-Rivera bought the property in December 2024. It had been listed for $665,000; he offered roughly $625,000, and the two sides ultimately agreed on a $630,000 purchase price.

There's no "secret sauce" to negotiating, he said.

He looks for properties that have been sitting on the market and have a fixable flaw. In this case, a strong cat urine odor was an issue he addressed using ozone machines.

"If there's a defect with it that's not visible in the pictures, much like the cat urine, then you get a lot more wiggle room in terms of offers," he said.

Investors who scour listings every day are often rewarded for their diligence.

"You have to look everywhere," he said, a process that can take time. It took him eight months to find this particular property.

The upfront costs: a 5% down payment, plus renovation costs

Keane-Rivera put 5% down — about $32,000 — and used a conventional loan. His initial interest rate was 7.75%, but he agreed to pay a 1% premium in exchange for a $10,000 closing credit.

The trade-off made sense for his situation because he planned to refinance quickly and wanted to preserve cash for the remodel. He refinanced after 12 months, within the 18-month window in which the higher rate still penciled out in his favor, he said. His new rate was 5.375%.

Putting less than 20% down generally triggers private mortgage insurance, or PMI, but Keane-Rivera said a lower down payment freed up cash for a remodel that ultimately cost about $150,000 — more than he had budgeted for. He took out a $50,000 loan from his 401(k) to help fund the renovations.

"Had I put in anything larger than 5%, I would have found myself in trouble," he said. His budget was tight enough that he also had to take on significant sweat equity rather than hire professionals for every part of the project.

Keane-Rivera finished the previously unfinished basement, adding three bedrooms, two bathrooms, a kitchen, laundry area, and utility space. He also converted the dining room into another rentable bedroom.

After refinancing, the property appraised for $875,000.

The cash flow: about $2,500 per month

Before refinancing, Keane-Rivera said the property generated little, if any, cash flow.

"Some months I would lose money, some months I'd break even, and some months I would make like $100," he said. "But that was all part of the calculation. It was going to cost me a lot of money to do the remodel, but after everything's said and done, it should produce a high amount of cash flow to make it all worthwhile."

When his interest rate fell from 7.75% to 5.375%, the property's cash flow improved significantly.

As of September 2026, the nine-bedroom rental was bringing in about $8,876 a month in rent. BI reviewed the lease agreements and confirmed the rental income. After expenses, Keane-Rivera said it was generating roughly $2,500 a month in cash flow. Some of his typical monthly expenses include:

• Mortgage payment: $4,786
• Utilities: $690
• Property taxes: $607
• Insurance: $212

He no longer pays PMI because his principal balance has fallen to 80% of the home's original value.

Utilities ran roughly 40% higher than Keane-Rivera expected because of poor insulation; one winter heating bill reached about $1,000. He has since added attic insulation and sealed the windows to lower costs.

The home's age also brought other unexpected expenses, including about $10,000 to replace old wiring and a $2,300 rent credit for a tenant who slipped on plastic sheeting during bathroom construction.

As a landlord, "there's always something going on," he said.

The operational reality

Keane-Rivera said the key to renting by the room is finding compatible roommates. He asks prospective renters about their past roommate experience and looks for people likely to live considerately with others.

He manages his properties himself, with help from virtual assistants that handle listings, initial tenant screening, and appointment scheduling. He estimates he spends about five hours a week on his three-property portfolio and hopes to reduce that to one or two by outsourcing tasks such as yard maintenance.

Having multiple units under one roof simplifies operations and allows him to generate cash flow while providing lower-cost housing in an expensive area.

"The reason for acquiring and expanding a large single-family home is to hit an economy of scale that allows me to provide good quality, low-cost housing," he said, "and make a healthy profit in a real estate environment that is subjecting all of us to higher cost of living, interest rates, and asset price volatility."