Starting out by House Hacking

[Ian Wilson]

Hey all,

I'm looking into doing some house hacking for my first real estate investment and was wondering if anyone had some good advice about doing it. I was listening to a podcast that said finding a great deal isn't as important in house hacking a multi-family property. Also I was wondering if anyone would be willing to share some of the nuiances that get looked over or if your costs (I am assuming they do) increase due to the number of doors that are being rented out.

Thanks for your help in advance!!

[Edward B.]

The deal isn't AS important but it is still important. As mentioned, make sure that the numbers will work down the road, not just now. And make sure they work without you supporting it as one of the tenants.

One expense that sometimes gets overlooked in multifamilies is the utilities. Make sure you know how they are billed. Are they separately metered? That's great because it is easy to pass on to the tenants. Or is it one meter running into the building? Often the case with water/sewer and sometimes with gas and electric. In which case you need to account for it. Also, even if you are going to self-manage, always, always, factor in a management expense when you run your numbers. At a minimum you need to understand the risk if you decide to do a deal that doesn't necessarily work with outside management.

More doors is more expense but much more income too. I see many people stall because they don't want to take on more payments than they could make with their primary source of income. They think it is too risky. However, it is often times actually more risky to go with fewer units. There have been many occasions when my vacancies and/or unexpected repairs have been carried by my other properties. If you only have the one unit though, it all comes out of pocket.

Good Luck,

Ed