I want to House Hack!

[Brian Quinn]

Well, the title says it all.  I have never owned my own home but I feel it would be a great way to break into Real Estate Investing, but where do I start? How do I find a duplex, triplex, or 4plex to house hack?  Should I start by looking for a realtor who will help me find a place? Start calling banks to get approved for a loan?  I would like to find a place somewhere in central Wisconsin or near Madison. I am absorbing as much BP content as so can and I'm loving it. Any help and advice is greatly appreciated, Thanks!

[Marcus Auerbach]

@Brian Quinn - house hacking is always a great plan and possibly the single best way to get started. Not only has it an immediate impact on your cost of living and your savings rate, but it also teaches you most of the essential skills to become a real estate investor. And the nice thing is, if you decide it was not for you, it is easy to transition out of it, so you can try your hand with very minimal risk. You are too far West for me to work with you, but you can always hit me up with questions here on BP.

Finding a great agent is IMO your first priority. Everything else will fall in place so much easier, because a good agent can guide you. Like knowing the best lender for your deal. I have currently 7 pending deals and 3 of them were on the brink of cratering because of the lender (client brought their own lender/mortgage broker). 

One was a VA loan with a poorly done pre-approval, got an amazing deal under contract and then found out they couldn't do it, one was a condo with a lender who found out a week before closing the it is not warrantable, and one was with an out of state lender, who is bent out of shape over a very normal Milwaukee basement. We got all three on stable ground, but ask my clients if they believe the choice of lender matters (they don't even care about interest rate at this point). It matters which bank and loan officer (!) you work with!

We know from statistics that about 70% of the people will work with the first agent they meet. I have no idea why - those are the same people that will shop for weeks on a $300 purchase. This is your biggest purchase and you want to have a pro on your side! Any industry professional will tell you the differences between agents are mind blowing and this is your biggest purchase. BP is a great place to find someone with an investment background. Second best thing you can do is ask a local, experienced investor for a recommendation. 

Do yourself a favor and find an agent who has the skills and experience you need! Your agent needs to be able to estimate rents (most can not), if you are buying an older property have at least some idea of repair costs and be able to establish fair market value before and after repairs. All that comes with experience and number of deals - I would look for someone who does at least 30 to 50 transactions a year; with 5 deals a year an agent does not have enough exposure to know more than you do.

Finally on the choice of building, let me say this: your future self will thank you if you buy a property that is in a good neighborhood and in demand. Because it is hot and in demand, you will never have a problem to rent it out. And if you want to sell it, you will never have a problem to do that too. Because it's in demand. You will be tempted to buy something that is cheap and the owner is very motivated to get rid of it. Think about that for a moment, you are about to step in the current owner's shoes, what will make you different. This is a tough one, because your instincts will tell you that the cheapest property is the lowest risk. Also, pay attention to size - it matters a lot. Always calculate the cost per square foot and compare. You will find that many great deals start looking pretty bleak when you measure them this way. Size and location are the two things you can't change, so be sure you choose well!

This first step has the power to change the financial trajectory of your life, I have seen it with some good friends and many clients! Good luck!