A Beginner's Guide to House Hacking | What You Should Know
House hacking is a term that has gained popularity in recent years as a way for people to start investing in real estate. Essentially, house hacking involves purchasing a property that has multiple units or rooms and renting out the extra space to offset mortgage payments. It’s a great way to start building wealth through real estate investing, even if you don’t have a lot of capital to begin with. If you’re new to real estate investing, the concept of house hacking can seem intimidating. However, with a little bit of knowledge and some planning, anyone can get started with this strategy. In this article, we’ll provide a beginner’s guide to house hacking and real estate investing.
Understand the basics of real estate investing
Before you start house hacking, it’s important to have a solid understanding of the basics of real estate investing. This includes understanding the different types of properties, the different ways to make money in real estate, and the potential risks involved.
There are many different types of properties you can invest in, from single-family homes to apartment complexes. Each type of property has its own advantages and disadvantages, and it’s important to do your research to determine which type of property is best for you.
There are also many different ways to make money in real estate, including renting out properties, flipping houses, and investing in real estate investment trusts (REITs). Each strategy has its own risks and rewards, so it’s important to understand the potential risks before investing your money.
Determine your goals and budget
Before you start house hacking, it’s important to determine your goals and budget. What do you hope to achieve through real estate investing? Are you looking to build wealth over time, or do you want to generate passive income? How much money do you have to invest? Once you’ve determined your goals and budget, you can start looking for properties that fit your criteria. Look for properties that have multiple units or rooms that you can rent out, and make sure they are located in areas with strong rental demand.
Find a property and secure financing
Once you’ve identified a property that meets your criteria, it’s time to secure financing. There are many different types of financing options available for real estate investors, including traditional mortgages, FHA loans, and hard money loans. It’s important to shop around and compare different financing options to find the best deal. Make sure you understand the terms and conditions of each loan, including the interest rate, repayment period, and any fees or penalties.
Renovate and rent out the property
Once you’ve secured financing and purchased the property, it’s time to renovate and rent out the extra space. This can involve anything from minor repairs to major renovations, depending on the condition of the property. It’s important to be realistic about your budget and timeline when renovating the property. Make sure you have a clear plan in place before starting any renovations, and be prepared for unexpected expenses that may arise. When renting out the property, it’s important to set fair rental prices and screen potential tenants carefully. Make sure you have a written lease agreement in place that outlines the terms of the tenancy, including the rental price, security deposit, and any rules or restrictions.
Manage the property and track your finances
Once the property is rented out, it’s important to manage it carefully and track your finances. Hiring a property manager you can trust can be extremely beneficial, freeing you up from the day to day to allow you to focus on other things such as growing your rental portfolio. This includes collecting rent on time, responding to tenant requests promptly, and keeping up with maintenance and repairs. It’s also important to keep track of your finances carefully, including rental income, expenses, and any profits or losses. This will help you make informed decisions about the property and ensure that you are meeting your financial goals.
House hacking is a great way to start investing in real estate, even if you don’t have a lot funds to work with coming out of the starting gate. Curious to see if house hacking could be the right strategy for you? Connect with our team. We can not only help you lease out and manage your property, but we help our clients find, purchase, and renovate homes as well, allowing them to achieve their real estate goals. Set up an intro call with us today.