For some, house hacking is the key to getting started in real estate; for others, it's just a smart way to build cash flow into an otherwise uncooperative rental market. Wondering how to get your foot in the door? Here's what you need to know.
What is House Hacking?
The term "house hacking" was coined by Bigger Pockets, but in general, the practice has been going on for as long as people have been owning and renting properties. House hacking refers to renting out a part of your primary residence. Generally, that means owning a duplex, triplex, or quadruplex, living in one unit, and renting out the rest. For some, it means renting out one or more rooms of a single-family residence. In an ideal scenario, house hackers can essentially live for free--allowing the rental income from the space they rent out to pay for the mortgage and maintenance of the entire property.
Why is House Hacking a Smart First Investment?
As with any investment, the viability of house hacking depends on the market in your area. But for many who want to get into real estate investing but haven't yet taken the plunge, it's a smart step.
- Owner-occupants enjoy the best financing terms. When you plan to use the property as your principal residence, you'll get lower down payments (as low as 0-5%, in the case of VA and FHA loans) and lower interest rates.
- House hacking serves as training for managing more tenants. Because you'll be living in close proximity to your tenants, it will be easier to keep an eye on your property and address repairs and other issues as they arise. It's a great way to earn a few notches in your landlord belt before purchasing more rental properties in the future.
- When you decide to move out, you can rent out the final unit (or the primary house) and enjoy the full benefits of positive cash flow thanks to your low-interest-rate home.
An Accessible Way to Start Small
Step one: talk to a lender. If you can get pre-approved for a single family residence, you can get pre-approved for a duplex (or larger).
Already own a home? Consider renting out an extra bedroom, or finishing the basement to rent out as an ADU. And even if you don't net massive positive cash flow at first, you'll massively offset your own cost of living, while gaining valuable experience as an investor and property manager.
When you stop and think about all the details you have to take care of as a homeowner, it sometimes feels like you're running a business! That's especially true if have to coordinate everything from family doctor appointments to home remodeling projects.
Many people get so caught up in their daily routines and responsibilities that they lose sight of all the things they actually can handle, do overcome, and can accomplish!
No matter how organized and motivated you are, though, problems, oversights, and blunders do occasionally happen. Fortunately, there are steps you can take to minimize the chances of making mistakes or forgetting something important.
Don't depend on your memory. Writing and revising lists of daily priorities, appointments, and reminders can be a valuable strategy for organizing your day. Mobile devices also have scheduling capabilities, note taking apps, and calendar features that can help you stay on track. When you commit a priority to writing or set up a reminder on your cell phone or tablet, you're increasing the probability that you'll remember appointments, fulfill obligations, and keep household projects moving forward.
Start with small steps: One challenge many people struggle with is motivating themselves to tackle an important project around the house. For example, let's say you desperately need to paint a room, straighten out a closet, or organize your filing system. Whether you're "too busy to turn around" or just plain unmotivated, it can be difficult to get started on a home improvement or organization project!
While you may have a few pet theories on why you can't seem to get started on a project, it might boil down to Newton's Laws of Motion. Back in the 17th century, physicist Isaac Newton stated that a stationary object (one that's not moving) tends to stay out of motion -- unless it's acted on by an outside force! Granted, he may not have been talking specifically about human beings, but the same principle seems to apply. Whether you're trying to get out of a warm, comfortable bed in the morning or take advantage of your new gym membership, it's often difficult to nudge yourself into action when you're in a state of rest. It's a problem we all have at one time or another.
The solution is to start small and build momentum as you go. Taking small steps at first, such as buying the supplies you need for a home improvement project, can often provide the extra push you need to get started. Telling a friend or family member that you're going to accomplish something this weekend can also help propel you forward.
If you need help in remembering things, consider buying a couple notebooks for writing daily lists. If you view yourself as a "technophobe," make it your mission to learn how to use the calendar app on your phone or tablet.
In addition to old-fashioned schedule reminders like wall calendars, appointment books, and desk calendars, you can even send yourself reminders via email or enlist the help of friends, family, or colleagues to remember appointments and priorities.
However, regardless of how many memory devices you use to organize your schedule or tackle household projects, keep in mind the motto of U.S. President Harry S. Truman: "The buck stops here!"
30 Noel Dr, Holliston, MA 01746
30 Noel Dr, Holliston, MA 01746
When you’re shopping for a home, it’s easy to be overzealous in your attempt to find the perfect property. One of the biggest regrets of home buyers is that of paying too high a price for their dream home. There should be a balance between cost and the right property for you. No matter what kind of house you’re looking to buy or where you plan to buy it, a little planning goes a long way to help you get the most for your dollar when buying a home. Below, you’ll find some tips to help you avoid the dreaded mistake of overpaying for a home.
Look For Amenities That Increase Value
Does the neighborhood you’re looking to buy in have a lot of cool perks? Perhaps the property is close to the heart of downtown or close to one of the most desirable schools in the area. These features add value to the home based on the demand in the neighborhood.
You should also consider if the neighborhood is known as what’s termed “up and coming.” The potential that a neighborhood is also a factor in the price of a home. Is there a lot of construction going on in the area? Is the home you’re buying in a great area but considered a “fixer upper”? High potential properties in desirable areas can actually give you a bargain. A nice property in an area that is still being established can also be a bargain but beware. You may end up paying a higher price as sellers and developers understand that people are eager to move into the neighborhood. Also, if a neighborhood seems to be built up too much, it’s not a good sign. An overdeveloped area can lead to decreased property values over time.
Inside the home, look for things that have been updated to increase the value of the property. An updated kitchen and bathroom add the most cost to a home as these are the most expensive rooms to renovate. Other perks in a home that greatly increase the value include new flooring, new roof, being situated on a cul-de-sac or dead end street, and easy access to highways and main routes.
Know That Some Features Decrease Value
Things like power lines, poor economic growth in the community, high-traffic areas, foreclosures, and unkept homes can all drag down the value of a property. If you happen to be looking in one of these areas, understand that you shouldn’t be paying top dollar for a home there. Look for bargains. Whether you plan to stay or simply flip a property, you need to know at what point the price will be right without overpaying for the home.