Seeking house hacking wisdom (first RE investment)

[Ethan Perry]

Hello all.  I'm 21 years old and am closing on my first property in 2 weeks.  The property is a 3/3 townhome with an unfinished basement. Once the basement is finished, the TH will be a 4/4.  The purchase price is $225,000 and it has already appraised at $234,000.  I'm using a 5% down conventional loan and was able to lock in an interest rate of 2.99% (thanks money printer).  Its not a home run of a deal by any means but its a great way for me to take action, avoid renting, and get a start in the real estate game.  I have a few questions for experienced househackers which I have listed below.  

1. How important is having separate bank accounts to separate my house expenses from personal expenses? I'm planning on renting out 2 bedrooms at around $600 a month. My PITI will be in the $1300-$1400 range which means I likely won't be cashflowing. I know that rentals should be treated just like businesses which is what they are, but seeing as the businesses would technically be losing money every month, I'm not sure how crucial the separate accounts would be. I could be totally ignorant on this and am curious to hear feedback!

2.  What rent collection methods or tools have people found best?

3.  In general, what tips, methods, etc have people found helpful in making their house hacking successful?

Thanks for taking the time to read!

[Daniel Haberkost]

Originally posted by @Ethan Perry:

Hello all.  I'm 21 years old and am closing on my first property in 2 weeks.  The property is a 3/3 townhome with an unfinished basement. Once the basement is finished, the TH will be a 4/4.  The purchase price is $225,000 and it has already appraised at $234,000.  I'm using a 5% down conventional loan and was able to lock in an interest rate of 2.99% (thanks money printer).  Its not a home run of a deal by any means but its a great way for me to take action, avoid renting, and get a start in the real estate game.  I have a few questions for experienced househackers which I have listed below.  

1. How important is having separate bank accounts to separate my house expenses from personal expenses? I'm planning on renting out 2 bedrooms at around $600 a month. My PITI will be in the $1300-$1400 range which means I likely won't be cashflowing. I know that rentals should be treated just like businesses which is what they are, but seeing as the businesses would technically be losing money every month, I'm not sure how crucial the separate accounts would be. I could be totally ignorant on this and am curious to hear feedback!

2.  What rent collection methods or tools have people found best?

3.  In general, what tips, methods, etc have people found helpful in making their house hacking successful?

Thanks for taking the time to read!

Don't compromise on screening your tenants, ever. Background/credit check, call their boss & their previous landlords, and make sure you're very clear on your personal expectations with them. House hacking can be a phenomenal way to get started, or (as with some people I know), it can quickly be the end of your RE investing career. For example, I tell new (house hacking) tenants not to leave the kitchen dirty, not to make noise in the evening and that I expect rent on the 1st, no exceptions. There's absolutely no ambiguity going into the arrangement as to how it will work and they know that they will be kicked out immediately if they don't do these things. 

Make sure you set and communicate your standards the same way I do. 

Also, I find that people who give advice on house hacking but have never done it and don't have significant RE experience generally give terrible advice. I see it all over BP. 

To answer your other questions: 

1.) Mine Venmo me, in the future I'll likely have them use Zillow. 

2.) I keep all of my receipts that pertain to the house but I don't have a separate bank account. All expenses are partially personal and partially business since I occupy a portion of the house. I (personally) do not need yet another bank account. 

Why can't this be a home run? A 4/4 should easily cash flow while you're living in it and $225 is very cheap for that large of a home. Unless your rents are terrible, this should be an extremely profitable arrangement. 

I'd also add that when you're holding your tenants to strict standards you need to treat them well too. It's really important that it's a win-win. I treat mine very well and what do you know I'm about to cross the 1 year mark for all 3 of them, at least 2 of which intend to stay minimum 2 years. 

Screen your tenants hard, treat them well, keep the house in good condition and this will accelerate your RE career exponentially. I bought my first house hack at 21 and quit my job by 23 

-Dan