First time househacker with a few questions

[Jack Plantin]

Just bought a two flat (6 bed, 3 ba) in Chicago's Hermosa neighborhood. PITI is $2350 (FHA on a 380k house)

Wife and I will live in the 2nd floor unit and plan to rent out the 1st floor for $1500 a month. After expenses it should leave us paying $1500 a month for our half until we move out.

I chose this property, because it has an unfinished basement that I plan to convert to a garden unit and an attic that I was also considering converting to a studio or 1 bed.

Questions:

1. There is a normal washer and dryer in the basement, should I allow tenants to use this for free if I'm paying the water bill? Or should I sell them for coin op machines? Or charge them $50 a month to use?

2. Does it make sense to take out HML or friend/family loan to finish the basement for 20k to get $800-1000 rental income per month? Same with the attic. Or should I do it myself slowly over the next year?

3. Attic and basement have only 1 entrance/exit, so would never be legal units. Is it too risky to put tenants in there?

4. What software (if any) should I use to run credit/background checks when finding tenants?

5. Any general advice for beginning househackers?

I'm a little intimidated by the challenge of being a landlord and renovating units, but I know this is a move in the right direction. 

[Jack Plantin]

Originally posted by @Daniel Haberkost:

Hi Jack, I've been house hacking for several years and can offer some insight. See my thoughts in bold below.

1. There is a normal washer and dryer in the basement, should I allow tenants to use this for free if I'm paying the water bill? Or should I sell them for coin op machines? Or charge them $50 a month to use?

I factored utilities into their monthly rent and then advertised it as an all inclusive price but I don't think it would hurt if you tried pricing as planned and adding "+ $50/month for utilities" in the posting. Worst case scenario you change it back after a few days or a week of no success. 

2. Does it make sense to take out HML or friend/family loan to finish the basement for 20k to get $800-1000 rental income per month? Same with the attic. Or should I do it myself slowly over the next year?

Assuming your numbers are accurate, if you're able to get another (on the low end of your estimate) $800/month immediately after doing a $20k renovation those numbers make sense. This is of course if you're able to rent out the unit quickly and actually receive the rents you say. Your financial situation is important here too, if you don't have any liquid reserves I'd hesitate on taking on more leverage. 

3. Attic and basement have only 1 entrance/exit, so would never be legal units. Is it too risky to put tenants in there?

I rent my basement which is the same but you have to make your own decision here. 

4. What software (if any) should I use to run credit/background checks when finding tenants?

Zillow makes this extremely easy. 

5. Any general advice for beginning househackers?

Screen your tenants thoroughly. Finding good deals is commonly discussed as the key to successful investing (and it's a huge part of it) but managing your assets efficiently is just as important. You already mentioned the background/credit check but make sure you also call their last two landlords, call their employer and conduct move in/move out reports that they physically sign. Finding trustworthy, responsible tenants makes this business much easier. Don't cut corners on the vetting process!

 Thanks for the advice! I definitely like the idea of just including it into rent. The illegal unit situation is definitely scaring me off a little right now.