Suppose you have been searching for a cost-effective or innovative method to purchase your first Hyrum investment property. House hacking could be the solution in that case! House hacking is when investors purchase a property with multiple rental units or with the potential to be converted into multiple rental units, live in one of the units, and then rent out the remaining units to tenants.
The idea behind house hacking is to use the money your tenants pay in rent to pay your mortgage and other property costs, allowing you to live in your house for free while the value of the property appreciates. It’s a tempting proposition for many, particularly if you’re just getting started as a real estate investor. However, as with any investment, this strategy has both pros and cons. Before you start house hacking for the first time, you must be aware of the following.
House Hacking Basics
Investors can receive a number of excellent benefits from house hacking. Therefore, you may be surprised at how few individuals use this method to acquire properties. There is no question that, if done properly, residing in your Hyrum rental property can assist you in paying your mortgage or rental bill, give your property time to increase in value, and provide some fantastic tax benefits as well. This can help to reduce costs for future investments or use the equity in your rental property to reach specific investment goals.
Is House Hacking Right for You?
Although you have all these advantages, house hacking also has a few disadvantages.
The Reality of Landlording.
In exchange for living virtually rent-free, you may be required to devote a great deal of time to leasing and managing your property. Landlording is a legitimate occupation that should be taken seriously. Unless you plan to have your rental property professionally operated by a Hyrum property manager, most house hackers handle the majority of the responsibilities associated with rental property ownership.
Living with Tenants.
Another important aspect of house hacking to remember is that you will live with the tenants. Even though you might not all live in the same apartment, you will likely see your tenants regularly and have to put up with their vehicles, pets, noise, and even personal property because of how close they are to you. It may be more difficult to maintain a professional relationship with your tenant if you live in such close proximity, and frustrations may flare if you find your tenants to be less-than-ideal neighbors. Nevertheless, house hacking could be profitable if you’re okay with such arrangements or if you find a great tenant.
Desired Lifestyle.
Make sure to account for your willingness to live in an investment property as you consider all the scenarios you might encounter as a house hacker. It is usual for first-time investors to opt for less expensive properties. If you intend to reside on the property, it is essential to ensure that you will be comfortable. Some individuals may experience frustration if their first investment property is not their ideal residence. House hacking, however, might be the ideal entry point into real estate investing if you have no problem lowering your standard of living for some time.
Zoning Laws & Neighbors.
Local zoning laws should be the final consideration on your list. Creating two or more rental units on a residential property is against the law in many places. Thus, carefully review local zoning laws before making an offer. Even if it is legal, it’s possible that your neighbors won’t be happy about your plans to move several tenants into your new rental, especially if the neighborhood doesn’t have a lot of multi-family homes. Even though you have no control over other people’s emotions, you can try to reassure them that you will be a trustworthy landlord by making an effort to interact with and speak to locals who live close to your rental home. A simple, cordial conversation can go a long way toward easing your neighbors’ concerns about your and your tenant’s impending move.
Are you in search of your next Hyrum investment property? Or, are you interested in learning more about how professional property management can facilitate real estate investment? Contact Real Property Management Cache Valley online today or call us at 435-753-5200. We work with investors like you to help build your dream rental real estate portfolio.
Originally Published on February 26, 2021
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