Real Estate Investing Basics

3 House Hacking Mistakes I Made (& How I Could’ve Prevented Them)

Expertise: Personal Finance, Personal Development, Real Estate Investing Basics, Landlording & Rental Properties
48 Articles Written
Tensed young man with head in hands

Just a few years ago, I was completely against real estate. I wanted nothing to do with it. I thought that in order to qualify as a real estate investor, you had to pass this unofficial test to prove that you were a money-grubbing jerk who would step over your mother’s dead body for a dollar.

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Thanks to BiggerPockets, I realized that not all real estate investors are like that. I learned that there is a community of real estate investors who are willing to give advice without compensation. After 11 months of research, networking, and interacting on BiggerPockets, I was able to go from a hater to closing on my first house hack.

Nine months of landlording later, despite all of the research I did, I still made mistakes. Since I learned so much from other people, I am morally obligated to share with you my three biggest mistakes that I made as a first-time landlord and home owner.

Mistake #1: The Up/Down Duplex

My first purchase was an up/down duplex. My plan? To rent the top half and Airbnb the bedroom in the bottom half while making a quasi-bedroom out of the living room. That plan 85 percent succeeded.

What I did not realize was the noise transfer from the top to bottom floor in an up/down duplex is almost unbearable. I can hear EVERYTHING that the folks on the top floor are doing. And yes, I mean everything—from them walking, to their TV, to normal conversations and other noises you don’t want to hear (peeing, sex noises, etc.). This gets very annoying, very quickly.

Aside from the noise, another problem with the up/down duplex is gravity. Everything runs down. That includes plumbing. The water that my top tenants use comes through their pipes down the pipes in my unit into the main line and out to the street. What does that mean? If there is a blockage, guess whose unit gets flooded with a disgusting mixture of kitchen sink and toilet water? ME!



Related: Why I’m Not House Hacking (& the Strategy That Will Cover More of My Rent)

Lesson Learned

This is not to say all up/down duplexes are like this. My advice to you is that if you are thinking of purchasing an up/down duplex, make sure you are with someone else. When you visit the property, have them walk around upstairs while you are downstairs. Have them walk and talk, as noise transfer can be both on impact (walking, dancing, etc.) or airborne (talking, music, etc.). If it seems kind of loud, then it will be almost unbearable when you are dealing with it every day.

On the plumbing issue, it is tough to test this before getting in. I suggest getting a sewer scope done and asking the technician to scope the plumbing lines within the property as well, from the sink of the top unit, through the bottom unit, the main line, and out to the street (or septic tank). This will make sure that the pipes are not blocked, in good shape, and will have a lower probability of clogging.

Mistake #2: New Build or Complete Remodels

The up/down duplex I purchased was a complete gut and remodel. The only thing that remained the same was the exterior wall—at least that’s what they said. Supposedly, there was all new plumbing, HVAC, water heater, electrical, roof, and appliances, all of which were under warranty.

The problem with all these systems working together is that they had not yet been tested in a living situation. Most of these upgrades would have failed the “real life” test. For example, it turns out that only 50 percent of the plumbing was replaced. The sludge from the previous occupants was clogging the pipes, which caused a backup in the lines such that my unit flooded every time I turned the kitchen faucet on. The smell was rancid, but the hundreds of flies loved it!

Plumbing was not the only issue. For two to three weeks in the heat of the summer, the AC would continuously trip the electrical breaker and stop working. My Airbnb guests (and I) were not happy. After the electrician and the HVAC company played the blame game for a few weeks, the HVAC company replaced the unit free of charge, but it was very expensive in terms of comfort.

In the winter, one of the PVC pipes on the furnace disconnected and caused a leak. This wasn’t too destructive, but the constant dripping each time the heater turned on and off was quite the annoyance. The HVAC company came to fix it. Again, $0 but a huge pain in the butt.

Then, one of the fuses that transfers electricity from the utility company to the property stopped working 100 percent. This was the line to a couple of the bedrooms and the hot water heater. So, I had a day of cold showers and really creepy electrical problems, with the lights consistently flickering, weird ticking noises, or half-lit rooms. This also was under warranty, but what the heck?! Can’t I just live like a normal human who is lucky enough to live in a developed society?

There have been a few other smaller problems that have resulted from these issues, including some broken drywall, fly infestation, etc. I pray that the large issues are fixed.

Lesson Learned

Do not purchase an untested new build or a complete remodel. If you do, make sure you do your due diligence not only on the property but also on the person or company who performed the remodel. Do they have a reputation of putting lipstick on a pig?

Putting lipstick on a pig means that they made the place look beautiful to increase the price, but the guts of the property are less than satisfactory. For example, they opted for new stainless steel appliances, hardwood floors, etc. However, the parts you can’t see (plumbing, HVAC, etc.) are not up to par.

Lesson learned!

Thoughtful hopeful African American employee looking at computer laptop screen, waiting hoping, person holding hands in praying position, expecting trouble solution, positive result, close up portrait

Mistake #3: Accepting Too Much Rent

My property was the only one of its kind in the neighborhood. Believe it or not, there was only one newly remodeled up/down duplex attached to a row home. In fact, there were hardly even any one-bedroom up/down duplexes at all. How did I know what to price this unit at? I didn’t. So, this is what I did.

Once I went under contract, I listed the property for rent and started showing it. I started off at a high price and incrementally lowered it until I got a qualified tenant. The price we settled at was a two-year lease at $1,700 plus a $50 monthly pet fee. So, the total was $1,750, which I later learned was likely $200-$300 above market rent.

Related: 10 Lethal Mistakes to Avoid on Your First Real Estate Investment

What’s the mistake here? Well, to start out, despite signing a two-year lease, the tenants no longer live there. We mutually terminated the lease due to a combination of it being too expensive and them not having the space they needed. They would frequently fight, the dog would bark at odd hours, and they would dance across the hardwood floors. The noise made it almost impossible to live beneath them.

Fortunately, I do have enough buffer such that if I reduce the rent, my deal still works. It just doesn’t work as well as it did initially.

Lesson Learned

Make sure you set the price such that you have a swarm of people interested in your place. After you’ve dwindled it down to three to five candidates who are interested and qualified, make your pick as to whom you think will be the highest quality tenants. Be careful to watch for any discrimination laws!

While this is something I did not learn firsthand, be sure there is a buffer in your rents. Can you reduce your rents by $200 and still make the deal work? If not, you may have yourself a risky deal. If so, there is a high probability you will be able to withstand a market downturn or lower rents.

Conclusion

Don’t get me wrong, I could write a book on all the mistakes I made on my first property. Instead, I spared you the small, insignificant ones and left you with the three largest. Hopefully, this article did not scare you. Clearly, I have made some big mistakes that I am dealing with appropriately, but I am still doing well. And hopefully now you won’t repeat them! Happy investing!

 

What are the biggest mistakes you learned from your first investing adventures?

Share with a comment!

Craig Curelop, aka thefiguy is an aggressive pursuer of financial independence. Starting with a net worth of negative $30K in 2016, he has aggressively saved and invested to become financially independent in 2019. From sleeping on the couch and renting out his car, he was able to invest in two house hacks in Denver and a BRRRR in Jacksonville. He plans to continue to investing in both Denver and Jacksonville for the years to come. Craig's story has caught the attention of several media outlets, including the Denver Post, BBC, and many other real estate/personal finance podcasts. He hopes to inspire the masses to grab hold of their finances and achieve financial independence. Follow his story on Instagram @thefiguy!

    Marcus Lawson from Roselle, NJ
    Replied over 1 year ago
    Thanks for the article Craig. Going to be househacking my first place very soon.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    No problem Marcus! Glad you liked it! Sounds great!
    Jamie McCauley Rental Property Investor from Grand Rapids, MI
    Replied over 1 year ago
    This article is spot on! I’m currently house hacking(up/down duplex) and experiencing the same noise issues you mentioned. Hearing sex noises in the middle of the night will make you rethink everything haha!
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Haha I’m glad I’m not the only one experiencing these problems!
    David Wong Investor / Operation Manager from Seattle, Washington
    Replied over 1 year ago
    I have a tub of ear plugs just in case for everyone in the house to use! Sex or train traveling behind the house are no match!
    Doug Harrell from Bridgewater, Vermont
    Replied over 1 year ago
    Great article, i like the points you raised about the up down condo situation. Looking into sewer pipes is a huge one. Knowing where to look and what to look for is a big task, when evaluating a potential purchase , if youre lucky enough to be able to walk through the property pre purchase. The above situation just reinforces the necessity of having a team of people behind you. Had the author known a contractor or an extremely handy person with 10+ yrs or construction experience, and had this person walk through the property with them these issues and bad experiences could,potentially, have been avoided or advised ahead of time…
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thanks, Doug! That’s absolutely right. Personally, I think what makes the difference between a good and a great agent would be pointing these issues out. A full sewer scope is always necessary.
    Jeff Knorr Real Estate Investor from Jersey City, New Jersey
    Replied over 1 year ago
    I also purchased an up/down duplex as my first house hack… The noise transfer between floors and even between rooms in the same unit is very annoying. It doesn’t have to be that way! With a little better construction most of the noise could have been minimized during the build phase (using insulation, sound sealants, and Quiet Rock instead of regular drywall). To help try to keep the noise down now, I’ve started installing padded hallway runners and padded area rugs–they make a huuuge difference! Definitely a lesson learned though–it’s much easier (and only slightly costlier) to do things right the first time.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Great advice, Jeff! I am going to have to look into that. Though I have not heard any of my tenants or AirBnb guests complain so I also second guess if I’m overly criticizing my place. Either way, hoping to figure out a solution in the next few months.
    Jeff White Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Good article Craig! I’m also dealing with some noise issues in my four unit because it is a up/down construction as well. It is sometimes tough to predict certain plumbing or electrical issues since a lot of that stuff is hidden from plain sight. Sewer scopes and a good home inspector can help though in the front end. In my opinion, the unfortunate thing with small multifamily in Denver (I saw probably 10 multifamily properties before I got mine) is that most investors who own them but don’t live in them usually do minimal maintenance/repairs, and that is unfortunate for house hackers/owner occupients/on-site property managers because you will see/hear all the issues. It sounds like yours was a fix and flipper who dressed it up while cutting corners on plumbing and electrical. The good news is that you have learned from this: how to handle tenants, how to handle loud pets, sex and other noises, how to handle maintenance/repairs, how to deal with contractors, and still cash flow while getting a great education . You are well on your way to achieving financial independence….one property at a time! The next one will be much better.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thanks, Jeff! Definitely a great learning experience!
    Jessica
    Replied over 1 year ago
    What a tough one. Best wishes with your multifamily pursuits =D
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thanks, Jessica! I’m sure the next one will be better. Knowing what I know now haha 🙂
    Frank Macias from Naples, Fl
    Replied over 1 year ago
    Great article! Is it unreasonable to assume you are now living in the upstairs apartment?
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thanks, Frank! You would think huh? I’m still living in the bottom unit. Going to move out of the place all together over the summer so I can get my next one!
    Account Closed from Orlando, Florida
    Replied over 1 year ago
    The last point you pointed out is not a mistake. Apartments complex do it here in Florida all the time. Infact every apartment I have lived have raised the rents by at least $50 every year and then give the new tenants coming in like $100 discount. At the end of your lease you either sign a new one or you leave at the end. My present rent went up from $1100 to $1300 in about 1 yr but I still stayed.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Who knows Ed? Maybe you’re right. But I think having a larger option pool to pick from would have helped my case in making sure I got tenants who didn’t fight and din’t have a dog. But I suppose there’s no such thing as the perfect tenant!
    Michael Boyer Investor from Juneau, AK
    Replied over 1 year ago
    Neat article Craig (and fun to read!). I think the “what not to do” genre can be the most instructive for readers. I also like how this piece (especially first 2 points) highlights that even the most dedicated landlord can be vexed by a problematic property. No matter how skilled or careful the captain (landlord), a leaky ship (property) will make the landlord voyage a rough one. Best of luck!
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thanks, Michael! Love the metaphor!
    Shelby Ek from Allentown, PA
    Replied over 1 year ago
    I also have an up/down duplex. I’ve lived in it for 12 years and am only on my 2nd set of tenants. It was the best thing I ever did for myself. The first few years were the hardest, lots of learning curves, mistakes. But now it’s super easy and I’m under contract on another 2-unit now and will repeat the process (hopefully much quicker this time). I live on the upper levels and have a toddler who I imagine sounds like a gorilla above my tenants, they insist however that they barely ever hear us. I hear them sometimes, but I also live in a city so I hear a lot of noises and probably am so used to it by now so much noise gets tuned out. Sound like you have a great attitude and are learning a lot! Best of luck to you.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thanks for sharing your story, Shelby! That sounds great!
    Joe Zupancic from Eagle, Colorado
    Replied over 1 year ago
    I’m currently living in the top floor of a two unit over/under house. A few of the things I’ve noticed. When we bought the place I could see it had TJI floor joist (relatively newer house) so that helps with the noise. It also has radiant heat, so the second floor has a 1 1/2 “ skinny slab that helps drown out the noise from downstairs/upstairs. Despite this you can absolutely tell exactly where the noise comes from, such an non-insulated access panel or interior wall that was not insulated. I’ve notice a lot of sound (TV, talking on the phone) comes around the downstairs unit door (one main entry area leading to up and down unit doors) and in the process of replacing it, I noticed it had no insulation around it in the rough opening, that helps a ton and is surprising how much noise that comes through a door is because of that. Replacing that entire beat up door with a steel exterior grade door should also help; I just haven’t completed that yet. When the downstairs unit was vacant for a month or so I was down there working a bit and noticed the worst of the upstairs noise was my 4 year old bouncing around. There is absolutely nothing I can do to mitigate this though! As far as big rents, we started out renting it out to two tenants. Through that first period we decided that 2 people make a lot more noise than one and specifically tracked down someone to live there single at a reduced rent even though it has 2 bedrooms. Less $ in the account but far less coming and going noise and has seemed to help a lot. In the end, this type of situation is not free of quirks. I’m certainly not complaining though, because all of this is far less painful than paying a full mortgage by yourself! We bought this place in December of 2015 before I ever heard of the term “house hacking” and it has been an amazing way to change our financial position.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Wow! thanks for this comment, Joe! Sounds like you’ve had some experience dealing with this problem. I am now moved out, but will definitely take your advice if it poses a problem with the tenants.
    Tyler James from Tucson, Arizona
    Replied over 1 year ago
    Great article! A big takeaway for me was to make sure that I have items such HVAC under warranty. That could have been costly experience.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Without a doubt! A lot of these things could have cost me a lot. It was a huge headache, but well worth it now.
    Daniel Callahan from Milwaukee, WI
    Replied over 1 year ago
    Thanks for the great read Craig! I’m super new to bigger pockets (only about a week in) and articles like these are steadily getting me more prepared to make my first investment. I’m planning on investing in a duplex as well and living on the top floor. I took down notes and will keep the valuable info you provided in mind when purchasing my first property. Take care brother!
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thanks, Daniel! I’m really glad this could help!
    David Blevins
    Replied over 1 year ago
    I am new to this site and have thought about real estate for years I’m turning 45 and used to build houses, apartments, and log cabins. So trying to get into using my brains and not my back to make money. The number one reason I found is cheap contractors more worried about there bottom line than quality, contractors tend to lean towards the lipstick on a pig method figuring what people can’t see like well insulated for sound reduction won’t hurt them they have made there money and long gone before you get tenants and realize the problems mentioned here. I strongly recommend getting and checking references before hiring any contractor, I learned to do quality work with what was supplied but like I said could have been a lot more done if had been supplied the materials to install. A lot is common sense things if you know what to check for like when you walk around do the floors creek or move, knock on walls and does it sound very hollow or more of a thud which means more insulation, look down walls to see if they are wavy if so contractor used cheap lumber and wasn’t worried about quality, always flush a toilet multiple times and check for consistency of flush and how fast it refills which will tell you if there is good water pressure (I don’t like to get into a shower and it feels like the water is trickling on me), and one other thing I can think of right off is wave your hand around windows and door ways to feel for air blowing around which tells you poorly installed and insulated. I’m sorry if rambled a bit here but I appreciated the noise comments most people don’t think of so since I myself am now taking more serious interest into real estate thought I would offer some construction experience input. Oh and one last thing to consider and I know it goes against what people want nowadays but think twice about those high ceilings, my bosses son I worked with who bought a house with high cathedral ceilings complained about how his electric bill was triple his neighbors because heat rises and takes way more to fill down to the floor, his house looked beautiful but he said he would NEVER buy another house with high ceilings again! Just something to keep in mind.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thanks, David! There is a ton of great tips in this post. I am going to take notes and definitely look for this on my next property.
    David Wong Investor / Operation Manager from Seattle, Washington
    Replied over 1 year ago
    Great Article! I would say, The first house is always a bunch of learning experiences waiting to happen!
    Tyler Rowland Rental Property Investor from Cedar City, UT
    Replied over 1 year ago
    Awesome read! I am looking for a “House Hack” myself at the moment and did not even think about those noise differences between a side by side duplex and up/down. I also really like the $200 dollar buffer in asking rent. Your article has been quite valuable to me as many on this website have.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Awesome – thanks, Tyler! That’s why we do it. Glad to help!
    Sheng Peng Investor from Houston, Texas
    Replied over 1 year ago
    I love house hacking. I put a few bedrooms into Airbnb shorten rental and it bring enough money to pay my property tax, HOA fee, water, electricity bills, Internet, cell phone bills, gas bill, put food on the table, even having leftover for saving of down payment for my next house.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    This is great, Sheng! Sounds like you’re doing it exactly right 🙂
    Marioly Toles
    Replied over 1 year ago
    Great post! Thank you for sharing that experience. I’m a BiggerPockets newbie, and just put in my first offer on a house hack where I’d be living on the top floor. I didn’t think about the noise until reading this. I’m definitely looking into soundproof flooring if this purchase works out.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thanks, Marioly! Good luck on the first house hack! I hope it works.
    Debbie W. from Lindenhurst, New York
    Replied over 1 year ago
    Thanks for your feedback. It’s always good to hear someone else who’s been through it. @David Blevins, THx also – good points, especially as relates to the high ceiling. Good luck to you guys.
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Thank you, Debbie!
    Stephen Rowe from Minneapolis, Mn
    Replied over 1 year ago
    That was a good read , thanks for posting Craig and thanks everyone for commenting. I am very new to the idea of house/hacks and have been looking for more posts about mistakes that folks have encountered along the way. I have lived in an up/down duplex for the last two years and while living here have been doing some light care-taking for reduced rent. Mainly shoveling, ice removal, mowing, and minor fixes inside that I can be reimbursed for. The landlord has recently mentioned the prospect of buying the property, which until I joined this site a couple of months ago I never seriously considered. He has had some decreased mobility and owns multiple properties on the block and has alluded to being overwhelmed at times over the years. I live in the bottom unit and the top unit is occupied by a mother and her son who have been there for the last 7 years. Now that I am interested, what steps should I take in getting a better idea of whether or not this would make a good investment. The only thing I have moving is to have a GC (who is also a friend) come through and look over the property. Most of the problems from a renters perspective I am aware of, but I don’t know how it would fare as a landlord. Any thoughts?
    Craig Curelop Rental Property Investor from Denver, CO
    Replied over 1 year ago
    Hey Stephen, Thanks! I’m glad you enjoyed the article. I would suggest posting your question in the forums rather than as a comment on a blog post. It will get much more visibility there and you will likely have many people answer you.
    Sara Kennedy from Greater Hartford, CT
    Replied over 1 year ago
    Craig – this article was SO, so helpful. As someone who is seriously considering house hacking to begin with, I probably would have been blinded with excitement to not even think about these things. And I live in an up/down apartment! Definitely writing down your tips and advice and will do them once we finally start looking. Thanks for sharing your experience!
    Tyler Work Rental Property Investor from Denver, CO
    Replied 2 months ago
    I know this one is a year old but thank you Craig! We were just under contract on an up/down duplex (of which contract was terminated) and we brushed aside many of the issues you bring up at the time because the numbers looked so good. This reinforces our decision and provides some additional insight we didn't think of.
    Trevor Day from Buffalo, NY
    Replied 2 months ago
    In my area, most (95%) of duplexes are up/down. My understanding is that the lower unit tends to rent for more. Given what you have just said, wouldn't it make sense to live in the upper unit, and then rent the lower? Upper units makes moving in and out tougher, and stairs are annoying, but I've been renting an upper unit for two years now, and noise is rarely an issue. But I'm sure the people people in the lower have heard footsteps, conversations, and other misc "noises".
    Patrick Harrington Investor from Bridgewater, Ma
    Replied about 2 months ago
    I agree with Trevor, if you move upstairs it would be quieter and you could get more rent for the first floor and the tenants would be happier on the first floor. Also some good points on when rehabbing the house spent the extra money on sound proofing the units better. It is cheaper to install when the walls and floor are I open during the remodel. You will appreciate it and when you move out your new tenants will also appreciate it.
    Robert Soto lopez
    Replied 30 days ago
    Thanks Craig, i read a little late, i happen to buy mi first duplex, tomorow im going to do the sound check, thanks for all the tips im going to follow.