When house hacking is your way to go, how do you go about it without actually losing money? Obviously, buying many properties increases housing expenses considerably. So, what can you do to make this profitable? Here are some tips.
Before we get ahead with it, let’s take a look at something very basic. What is house hacking? It’s when you buy one or many houses to rent them out or to live in and rent out other spaces in the same unit. For example, if you buy a three bedroom house, you may want to rent the other two bedrooms out or maybe you will live in the den and rent out all three bedrooms! Whatever it is you are doing, it’s important to know what you’re getting yourself into and how to make money out of it, since that’s the entire reason you are buying these homes anyway!
Since the purchases you are making are all about the money, don’t get emotional about choosing a house. Here, it’s important to choose two people who will help you get over your feelings - your lender and your agent.
Wherever it is that you’re looking to invest in,finding the right lender and agent are important factors to consider. These two people will form your core team (and this team will grow as and when your business in real estate does) and they will help you make the right decisions. Once you find that a property has good value and is in the market for a great price, put your money on it. Don’t think about your dream house on the mountains or that big yard you were dreaming about. In all probability you might not even live there, so it really shouldn’t matter.
Just go ahead and make the purchase and begin your work.
Know Your Price
Once you are prepared to go house hunting, look at various real estate websites and keep track of any property that interests you. Before you lock down on anything, you’ve got to make up your mind about one thing: It is to be clear about how much you’re willing to spend and to look for properties in that price range alone. Remember the point about you not living there for too long or at all. So, don’t spend more than you have to.
Set alerts on hot properties and watch their prices. Your agent should be the person who helps you out in finding properties and markets that hold a lot of promise. Once you see the price of a great property go down, it’s time to lock it in. If you wait a little too long you might lose the property and will find yourself back in square one. So, stay alert and keep a close watch on the properties you’re really interested in.
Take A Hard Look
When you start locking in on a property, study it. How many bedrooms and bathrooms does it have. Are the bathrooms inside the rooms or outside, where multiple people can share them? What kind of neighborhood is the apartment in and how much rent do people normally pay for a one or two bedroom apartment in that area?
Once you have all this information, it’s time to do the math and get your numbers straight. What would you have to do in order to enable cash flow? If you take a one bedroom and rent out the couch, that’s not going to pay your mortgage. But, a two bedroom might just do the trick. You could either rent it out, or if that’s not possible, there are options like Airbnb that will give you regular income. While the math may not add up to your expectations in the beginning, you will soon see the fruits of your labor.
Close On The Property
Once you are convinced of your plan, it’s time to put it to action. When you’re giving your agent a number to negotiate with, don’t low-ball it, especially in a seller’s market. In that scenario, your offer can easily be ignored and you may have to start again from scratch. Instead, give them an offer that you both can negotiate upon.
Then, get someone to appraise the property and see how much it’s worth on the market, Once that’s done, hopefully, the final offer on the property will be less, and you’d have made some equity immediately. Close in on the deal and inform your lender so that they can start the payments and get them done on time.
Then get the house tweaked so that it’s ready for you (and your tenants) to move in as soon as possible. This could take a few weeks, even if the repairs are minor but it’s all good in the long run. You don’t want minor issues that you could have fixed upsetting your renters because in the end, it will affect your reputation.
Find The Tenants
Although it’s illegal to sign a lease before you get full possession of the house, do advertise online using property portals and do everything you can to get the word out. The date you put on there could be in the future - a date by when you’re sure you will get the house. This way, no one thinks they’re being misled.
After this, the responses will start coming in. Whenever you’re free, set up ten-minute phone calls with those who are interested. The following questions are important: Where do you live now? What is the rent you pay currently?Why are you moving and what can you afford? How much do you earn? Do you like pets? How do you get along with your current landlord?
Once you think a few prospective tenants are doing alright, call them in to see the house. Here, make sure you have detailed everything. Be as transparent as possible so that they don’t think they’re being cheated. Show them the home and be a good host, keep some coffee and cookies around for them to enjoy.
Be patient with their questions and make sure that they’re comfortable with the rent you are suggesting. You can negotiate but keep your end goal in mind while you fix on the final rent. And the next thing you know, you might be waiting for your new housemate to move in! Good luck!