Best Properties for House Hack

[Eric Fernwood]

House hacking is a proven method for generating income. We've worked with multiple clients to select and renovate properties in a way that if house hacking doesn't work out or your life changes, you can turn it into a long-term rental.

Our property selection process is based on the tenant segment we want to occupy the property. A rental property is no better than the tenant who occupies it.

Over 15 years ago, we selected a narrow tenant pool segment that had a high concentration of what I call "good tenants". A "good tenant" is someone who stays for many years, always pays rent on time (even during bad economic times), and takes care of the property. It's important to note that such tenants are the exception, rather than the norm.

Once we identified this segment, we then determined where and what they were renting. Based on this, we develop a property profile, which is a physical description of the properties that this segment is willing and able to rent. We then select conforming properties. So far, we've delivered over 490 rental properties using this process. Our results have been excellent.

There are some differences between the properties we would normally target and those that would also be good for house hacking. I listed some of the considerations for a house hack property below.

• For house hacking, we recommend a four-bedroom, three-bath house with a three-car garage. Larger properties, like five-bedroom houses, have a strong seasonal component and a narrow tenant segment so they are not the best long-term rentals.
• The community in which the property is located must be considered. For example, many homeowner associations do not allow house hacking.
• The number of bathrooms is an important consideration. When selecting a property, make sure that the number of bathrooms is no less than the number of bedrooms minus one. For example, if you have a four-bedroom house, choose a property with at least three bathrooms.
• Parking is an important factor to consider when buying a property. I recommend a property with a three-car garage because it offers more parking space. I would avoid buying a property on a cul-de-sac due to limited street parking.
• It is essential to have a property with an open floor plan. People tend to congregate in one area, so you need to have a large flat screen and ample seating.
• A house with a pool might seem desirable, but it comes with additional insurance and maintenance costs. Some of our clients install a hot tub with attractive lighting and such.
• Do not use a rental agreement from a stationary store. Get a rental agreement from a local property manager and then modify it for house hacking. Also include clear guidelines on quiet hours, cleaning up the kitchen, shared responsibilities, guests, etc.

There are differences in renovation for house hacking. Below are examples.

• We often install commercial-grade nylon carpets in the bedrooms of our rental properties. However, with house hacking, there may be more frequent changes than with long-term rentals. Therefore, I recommend using LVP flooring instead.
• I recommend using Quickset Smart Key locks on the bedroom doors. These locks can be easily rekeyed by yourself. If you use regular locks in Las Vegas, rekeying costs $85 for the first lock and $55 for each additional lock.
• You may want to install garage door openers that support the myQ protocol and have people open the garage door with their app. This saves you from handing out clickers and changing the codes. You can also do the same with the front door lock. This enables you to make quick changes without doing anything physical.
• I would recommend installing surveillance cameras both inside and outside the property. Inside, cover the kitchen and family areas. This is important for insurance purposes and for identifying the source of any problems that arise.

I strongly recommend you work with an investment team that has extensive investment experience and all the resources you need, including renovation.