How To Save During First House Hack

Question

I am in the works of acquiring my first investment property, which will be a duplex that I plan to house hack. It took me a year of being frugal to save for the down payment. This year, I have several life events that won't allow me to save as well as I did in the past year. What are people's suggestions to save money quickly during your first house hack to either fix it up or save for the next one? I am a regular W2 employee with a decent salary, but it still feels like it takes years to save for just a 5% down payment. I'm wondering what strategies there are to scale quicker.

Julien Jeannot · Answer

Congrats on your first property! I was in the same boat with my first duplex. Struggling to save to reinvest. A couple of things I would have done different to expedite the process. - Rehab and rent for market price the unit I was not living in sooner. - Enlisted my friends to help out on projects. - Change jobs more often to seek higher salaries. - Network more with local investors to partner with someone with more funds. - Grind to find opportunities to JV with my new investor friends. - Partner with family sooner.

Andrew Hesse · Answer

@Spencer KrautkramerIt is definitely well worth it to have a side hustle that can help put some extra cash in your pocket. While this is not for everyone, one side hustle that I did for awhile was donating plasma which ended up helping me make around $700-$800 per month at the time! Pretty good for only spending about 8 hours a month!

Ryan Thomson · Answer

@Spencer Krautkramer great question and @Julien Jeannot gave some great answers. I would add that repairs should meet the following criteria if you are going to pay for them while trying to scale: 1. Does it need to be done? 2. If I don't do it, will something get worse and cost more later? How much more and is that worth doing now to avoid the future extra cost 3. Will this repair or change help generate more rental income? If the answer to any of those question is "yes" then I would consider doing the work. Otherwise, I would save for the next house hack so you can scale.

Byron Valles · Answer

Congrats on your first duplex! My first house hack was also a duplex. Like you, I also felt that even with the cash flow from the house hack it would have taken me years to save another 5%. You mentioned having a W2 with a decent salary. You could consider borrowing against your 401(k) for the next deal (it's what I did). Byron

Jake Andronico · Answer

@Spencer KrautkramerCongratulations on your duplex!! That's awesome. You may not like this answer, but for me to get into my 2nd house hack - it was a side hustle. I was able to save $45K in 15 months waiting tables and flipping items on eBay. I ate ramen and drank smoothies w/ spinach for fruit/veggies... only spent about $50-60 on food per week. Barely any friends or family during that time..... No real trips. To be honest, it sucked, but it's already paid off. You do not have to be that extreme, but if you're curious about relatively lucrative side hustles, let me know and I'd be happy to share. Made about $20k per year net (I did it part time for about 2 years) selling higher end electronics on eBay. Really helped boost my savings. Very simple process, but does take time after/before/during work.

Laura Shinkle · Answer

Maybe I'm reading this wrong, but it sounds like you haven't gotten to the house hack yet? Once you've purchased the househack, that will explode your savings rate (or should anyway). Your living costs should go down, allowing you to save faster. Some other things to think about: -Make sure you're looking at all options for the househack to make sure you buy the right property. Don't just buy a multifamily just to buy one. Make sure it's the right deal/option for you. -If you buy a multifamily property, can you also househack the rooms within your unit that you live in? That would increase your cash flow.-If the property needs work, consider a renovation loan. That would allow you to roll the costs of renovation into the loan, so you're putting 3 or 5% down on the total amount, not just the original purchaseGood luck! Let us know how it goes

Kenny Smith · Answer

@Spencer KrautkramerAs already stated, with house hacking, you should be putting most of your living expenses back into your pocket if done correctly! Which will definitely help expedite the process.Also, if you plan on doing some renovations on the place to help improve the value of the property, I would highly consider taking out a HELOC to fund the next deal. This will free up the money that you used to renovate to essentially pull back out of the property and do it again. That is why for most folks, if done right, it starts to become easier to scale as you acquire more and more property. Just make sure you do this before you move out as getting a HELOC on a non-owner occupied place is very hard to find.Best of luck!Kenny

Spencer Krautkramer · Answer

@Julien Jeannot @Ryan Thomson Thanks guys for the input! This is helpful