House hacking as you rehab? Wisdom/tips appreciated!

[Chris M.]

Hey guys, right now my plan is to get a 3-4 bedroom house that needs maybe 10-20k in mostly cosmetic upgrades/repairs. This will be my first house and I plan on living in it for ~2 years. Thus, after I buy it I was hoping to immediately seek out 2-3 roommates to house hack as I rehab the house.

Here's my question: have any of you run into trouble when rehabbing a house when you have tenants/people living in the house?

Obviously if a bedroom needs some serious rehab I'd do that first before renting it out, but I'm wondering if doing something like rehabbing the kitchen with people living there is a bad idea. Is there a liability risk? Other things I should be aware of before I attempt this? As my first house I feel like rehab might take me a while, this is why I'm planning it this way.

Thanks to anyone who can offer wisdom about house hacking/renovating a house with tenants actively living there.  

[Sarah D.]

We are house hacking a 4 unit, and rehabbing all units.  We rehabbed the kitchen of our unit while living there, and although we were ok with it I would have a real problem tolerating it as a tenant.  There's so many issues (definite liability on a lot of sides, finding insurers to tolerate risk, huge mess from rehab, lack of access to basic amenities).  Other issue is noise, lots of noise.  

I'd do the major things before getting roommates, or kick the roommates out before doing the major things.  

[Casey Murray]

There's a huge difference between house hacking a multi family (MF) compared to a house (SFR). House hacking a SFR with roommates (i.e. tenants) seems really challenging and I would not do it. I agree with @Sarah D. and do it before tenants move in. Or consider buying a MF property and house hack each unit one at a time. Best of luck.

[Jake Thompson]

We are house hacking a duplex and we rented out the better unit and live in the one that needed the majority of the work.

That being said my neighbor is also an investor and is house hacking a 4 plex. I really like his strategy. They are rehabbing the units one by one. As they finish one unit and a tenant moves out of another they then move onto rehabbing the newly vacant unit and rent out the newly rehabbed unit. They are doing this until they have rehabbed all 4 units then rinsing and repeating.

I suppose you could do this on a smaller scale. On a single family rent out the other rooms then as people move out you move on to their old room. Or just work it out so they rotate with you every so often. I'm not sure how hard it will be for you to find roommates willing to work with you though. 

[Sarah D.]

@Jake Thompson so cool that your neighbor is doing the same thing!

[Jake Thompson]

Yeah, we actually met at a local meet up out in Linda Vista and then about a month or so later it turned out he bought the 4 plex next door, without knowing it was right next to me! He has been immensely helpful and basically has been mentoring me. I'm pretty fortunate!

[Louise A.]

@Chris M.

I've done house hacking and rehab simultaneously but never with roommates (except my unwilling husband!).  
Definitely do not rehab while you have people paying you rent under the same roof.  A different unit is fine as long as you explain the situation, but any tenant is going to want a refund if you're tearing up the place when they're paying you to live there! 

Good luck!  

[Chris M.]

Thanks, @Louise A., from all of the feedback received it definitely sounds like it would be best to do any common area/bedroom rehabs before renting out the rooms. My main concern is that since this will be my first house/rehab experience, it'll likely take me longer to fully renovate the house than I think. 

However, I will be primarily looking for a house that only needs 10k - 20k cosmetic repairs... so as long as I'm careful and get proper house inspections, hopefully I won't be in for too many nasty surprises during the rehab phase. 

Basically trying to find a balance of a house that needs some repairs where I could really add some value, but doesn't need so much work that I'll get consumed as my first deal.

@Jake Thompson I think that's a smart strategy. Something I could do is Air BnB in this way: put 1-2 of the bedrooms on Air BnB as I rehab the other rooms to get some extra cash flow coming in during the rehab period. Guessing there are some rules on this with Air BnB but hopefully if the rehab is consolidated to unused bedrooms it won't be an issue.

Basically trying to approach my first house/deal as intelligently as I can. Mistakes are inevitable, but with the BP community, podcasts, books... I can definitely minimize my mistakes in an effort to make this first deal a true success. Thanks again for the feedback guys.