House Hacking

Hello Aspiring Chillers,

House Hacking

So, you're eager to step into the world of investing, and in my view, the most valuable entry point is what we call "house hacking." It's a bit more involved than stock index investing, but it's an excellent way to gain a comprehensive understanding of various aspects of investing.

What is house hacking?

Traditionally, house hacking means getting a property with multiple living units, living in one, and renting out the others. The idea is that your tenants help cover your mortgage, and you build equity while managing the property.

Who is this for?

This is for anyone looking to make the jump to financial freedom. It can propel you forward faster than a normal W2 job ever could alone. It sure did for me. I just exited my first deal 4 years after starting this journey. You can even start this while you are young and in college, having a Single Family Home (SFH) and renting out each of the bedrooms to other college students. It's an easy way to have your rent covered in college and then sell a home four years later to start your life with some cash instead of living paycheck to paycheck.

What will I learn?

1. How to analyze and pick good investment deals. This involves creating a "buy box" where you assess various factors like location, potential for growth, and property condition. You'll need to consider if the property aligns with your investment goals and risk tolerance.

2. The basics of property maintenance and fixing things. You'll quickly realize the importance of being handy. Knowing how to fix minor issues can save you a lot of money in the long run. Make sure to save a little extra in case of plumbing, or electrical work, where you should probably get a professional.

3. Understanding important real estate contracts. Dealing with contracts might seem intimidating, but it boils down to grasping a few simple terms and conditions of property transactions.

4. Navigating interpersonal relationships in the real estate game. Dealing with people, from tenants to professionals, is a crucial skill. Being diplomatic and assertive can make your investment journey smoother. You'll learn to communicate effectively, negotiate, and build positive relationships in the real estate community.

5. Strategies to make money through real estate investments. It's not just about rent. You'll explore ways to make your property work for you, such as through appreciation and potential tax benefits. This might involve understanding market trends, property management, and how different investment strategies can impact your returns.

How do you do it?

Quick disclaimer: This isn't financial advice. Always consult professionals before making significant financial decisions. This is more of an educational and exploratory journey.

Now, here's a roadmap if you're starting fresh in the world of investing:

1. Find a reliable investor-friendly realtor. Look for someone experienced in deals similar to what you're planning. Working directly with them can fast-track your learning curve. They can offer insights into market trends, help you navigate negotiations, and provide valuable advice based on their experience.

2. Choose the right neighborhood. Look for up and coming places with well-maintained homes and potential for growth. Consider factors like tax abatements and the age of the roof to save on costs in the long run. You'll need to assess not just the current state of the neighborhood but its potential for future development and value appreciation.

3. Save up some cash. In the U.S., explore banks offering FHA (Federal Housing Administration) loans with a low down payment. Factor in closing costs to determine how much you need to save. This might involve exploring various loan options, understanding interest rates, and planning for potential upfront expenses. A lot of the time it is much less than you think!

4. Select the type of property. Aim for a multi-unit property; a 4-plex is a great option. Ensure that the rental income can cover your mortgage costs. This means not just the mortgage but also accounting for potential expenses like property taxes and insurance. Using mortgage calculators can help a lot in this stage.

5. Plan your exit. You'll need to live in the property for at least a year with a FHA loan. Consider a 5-year strategy for potential appreciation in property value. Think about whether you want to keep the property long-term or use it as a stepping stone for more significant investments. This involves understanding the market dynamics, predicting future trends, and aligning your investment with your long-term goals.

6. Secure a mortgage. Dive into mortgage options, considering factors like interest rates and the length of your ownership. It's a crucial aspect of the process, and understanding the nuances can help you save money in the long run. This might involve researching different mortgage types, understanding how interest rates affect your payments, and planning for potential changes in your financial situation.

7. Don't skip the inspection. It's a necessary step to avoid potential issues that could be costly later on. It's worth the investment, as it can potentially save you from significant future expenses. A thorough inspection should involve professionals checking the property's structural integrity, plumbing, electrical systems, and more. My first time I had 2 different places go into contract only to find foundational issues that were not obvious to anyone but a professional.

8. Find reliable tenants. This step is often underestimated. Ensure your tenants can pay rent consistently, and understand the eviction laws in your area. This might involve thorough background checks and setting clear expectations. You'll need to develop screening criteria, understand local landlord-tenant laws, and establish effective communication channels with your tenants.

9. Take the plunge. Many who embark on this path find it rewarding. Give it a shot! Remember, it's not just about making money but also about gaining valuable experience and learning along the way. This might involve continuous education, networking with other real estate professionals, and staying updated on market trends. It costs nothing to take the first step and reach out to a real estate agent. Do not wait!

If you are interested in learning more reply to this email and we can have a conversation about it!