Minneapolis, MN · Member since 2019 · 54 posts · 53 votes
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?
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
Omaha, NE · Member since 2020 · 611 posts · 665 votes
6y
Congrats on closing your first deal. People make too much of "home runs" sometimes. As long as you put together a solid string of wise investments, nothing has to be profound to build you great wealth. You've already done the hardest part: buying.
To you questions: 1. Opening a separate account is smart. Treat your investment like a business from day one. It puts you in the best position to build positive habits. You'd be surprised how profoundly a business outlook will impact your investing career. 2. Direct deposit and mail-in checks tend to work just fine. Especially when you live in the same house with your tenants. Using more sophisticated rent gathering methods may cost money and be over-complicated for the house hack. 3. Same as #1. Treat it like a business. Don't be buddies with your tenants. Be nice. Be professional, but don't allow yourself to think of it like a frat house. You want to have renters who like and respect you, who want to live in your home, but you don't want renters who take advantage of you because you're a nice guy or you let things slide.
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
- Similar to the advice from Jody and Daniel, he recommended the importance of a professional relationship with tenants: "My advice is to be friendly to your tenants in passing, but don't hang out with them too frequently outside of the property."
Later in the book, Craig also discusses a number of angles for improving a house hack such as AirBnb, adding your own rooms, etc. Where do you plan to live in the house?
Rental Property Investor · Marine City, MI · Member since 2016 · 145 posts · 230 votes
6y
Congrats on closing! What to take action, and it sounds like you have a good grasp on your next steps.
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!
If your plan is to scale and continue to grow your business/portfolio, then you will want to get an LLC and bank accounts. Start treating it like a business. Get organized, develop systems and become efficient. One main reason to start your LLC and bank accounts is to show banks/JV investors/Private money lenders that you're serious and legitimate. Down the road you may need some of the aforementioned entities or individuals to make deals happen. Banks often look at your business /industry history and experience when lending out money for commercial loans. Having your LLC and bank accounts already established will give them proof that you know what you're doing. As a result, this will give them more confidence in lending you money. If you're going to scale start your business now.
2. What rent collection methods or tools have people found best?
For my house hacks I just went with a drop box in the house where everyone deposited rent. Good old fashion check or money order. I'm looking into Cozy.co as an electronic option for my properties moving forward.
3. In general, what tips, methods, etc have people found helpful in making their house hacking successful?
Have a strong lease agreement and be firm with your tenants. They may be friends, but explain to them that this is a business for you, and not a gentleman's agreement. Make them sign leases. I would also add that it would be beneficial for you to chose your tenants wisely. Try to find someone that will not only pay rent, but maybe someone that is like minded, professional and driven. Who knows maybe they'll be a business partner down the road.