What should I be sure of before starting?

Question

Hello BP, I am interested in househacking and I feel as though I am not ready. I feel like there is more information that I need to know before I am able to go all in on real estate. I've been browsing the forums and making a few posts to try and learn as much as possible before diving in. What information do you wish you had before starting? What were your strategies and how did you adjust after something was inevitably not perfect? Thank you for any help!

Michael Alexander · Answer

Jack, I say this with all the love and respect I can muster. You will never be ready, you just have to jump. I’m sure every member on this platform, myself included felt exactly as you feel right now. Some days I still feel that way! Trust your gut, but the only way to progress is to move forward. I look forward to congratulating you on your first deal!

Benjamin Sulka · Answer

Jack,

Network with agents who work with house hackers and lenders that have lent to house hackers.

Another thing to mention is how you do your analysis. Make sure the property makes sense as an investment both when you're living there, and when you're not. Consider multiple exit strategies as well. Can I turn it into a LTR, STR, or even sell it?

I also wish I would have had a better understanding of income requirements and income history. To qualify for most low down payment loans you have to meet a certain debt-to-income ratio. If you don't have sufficient income, you won't be able to get bank financing until you do. I wanted to jump in right out of college but I didn't have a full-time job yet so I had no income.

Nathan Gesner · Answer

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turner or The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the BiggerPockets podcasts. This will clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.4. NETWORK!!! Get out of your comfort zone. Stop hanging out with your deadbeat buddies that spend all day drinking, talking sports, and otherwise wasting away. Go to BUILD YOUR TEAM at the top of the screen and look for local investors or meetups in your area. You can also find real estate investing groups through meetup.com, facebook, or a Google search. Birds of a feather flock together!

5. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. BiggerPockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.6. Study the market. You can learn to do this on your own or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR that works with investors and knows how to best help you.

7. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

Alecia Loveless · Answer

@Jack Hamm Hi Jack, I house hacked 2 bed and breakfasts for 24 years living right among the guests. Once you do it a week or two you get used to it and then it just becomes the norm.

You will want to put locks on the doors and make sure that you maintain a set of master keys that no one else has access to if you’re sharing a home. In this scenario also come up with a list of basic house rules for everyone’s benefit.

Of course it depends on if you’re house hacking your personal house and sharing living space or buy a 2-4 unit what your experience will be like. Iv you just have a 2-4 unit it’s much easier as you have your own space. You’ll learn how to manage as you go along. Just try to make the best decisions and build your list of contractors and handymen and you should be fine. And always try to pay them quickly so they’ll be happier to respond when you have an emergency.

Julien Jeannot · Answer

You'll never be 100%. Better to jump in and figure it out. Grab yourself a solid real estate agent who is experienced in what you are looking to accomplish.

Daniel McDonald · Answer

Hey Jack,

I am on my second house hack in Beverly, MA and I don't regret it for one second. There are plenty of frustrating times but overall the good outweighs the bad. I wish I had started sooner. My biggest piece of advice is to really make sure you find an agent that understands house hacking. They will be a big mentor throughout your journey. I am also willing to help out where I can. Feel free to reach out!

JD Martin · Answer

You should be sure that you really, really love real estate. Because if you don't this is going to be a really hard slog. At the beginning when you have time but no money, you have to put that time into RE and if you don't love it you will resent it.

Nicholas L. · Answer

@Jack Hamm

do you have savings, a down payment, and reserves?  everyone is all about mindset but when you close, you have to have money =)

Jose Jacob · Answer

Hello Jack,

You are on the right track.  It is a smart idea to start with house hacking.  You will save a chuck of money with house hacking.  You are ready as long as you can put down a downpayment and get approved for a loan for the house you are in mind to buy.  I know taking the first step will be little scary.  But as long as you are approved for a mortgage, you will be fine.

Bud Gaffney · Answer

@Jack Hamm make sure you have enough reserves per unit.

What should I be sure of before starting?

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