Buying & Selling Houses

7 Steps I Took to Land My First House Hack (& Rent It Out) With Ease

Expertise: Personal Finance, Personal Development, Real Estate Investing Basics, Landlording & Rental Properties
58 Articles Written
Small grey house with wooden deck. Front yard with flower bed and lawn.

A few years ago, I did it! I got through the highly feared “analysis paralysis” stage and closed on my first deal. How was it? Easy as pie. Smooth as silk. A piece of cake. A walk in the park. Insert any other lame cliché here.

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For those of you on the brink of offering on your first property, I understand why you might be hesitant. This is likely the largest purchase of your life. It is difficult to find the perfect property that meets your cash-flowing and emotional needs.

The bottom line? For a house hack purchase, your goal is to cash flow. You will likely not be living there for more than a year, so ignore any emotions, run the numbers, and if they work, put in an offer.

OK, so you have done away with your “feelings” of finding a beautiful property. You run the numbers and all of these catastrophic scenarios run through your head: What if I can’t find renters? What if the furnace breaks? What if the roof falls off? The list goes on.

There are countless scenarios of what could go wrong. Just ask Chicken Little. However, those crazy scenarios are the exception, not the rule.

To those of you who may feel uncomfortable making that first offer on a house hack, this is article is for you. I’ll describe the seven steps I went through in closing my first house hack—and you’ll learn just how easy it was.

7 Steps I Took to Land My First House Hack (& Rent It Out) With Ease

Step #1: Build a team.

The first step is to build a team. As things come up (i.e., repairs, tax planning, litigation, etc.), your team will grow. However, there are only two teammates that are absolutely crucial to your first purchase: your lender and your agent.

Once I knew I was moving to Denver, the first thing I did was reach out to the BiggerPockets community and ask for lender recommendations. I then went through the process of getting prequalified with four to five different lenders ranging from big banks to local credit unions. By getting prequalified, I developed an understanding of what I could afford.

Once prequalified, it was time to find an agent to help with the property search and closing. Again, I reached out to the BiggerPockets community in Denver and met with six to seven different agents. Though it was not easy to decide, I ultimately went with someone who was good with numbers and did not try to sell me with any emotional talk of purchasing my first place.

Step #2: Find the property.

The search is on.

Living in Denver, Colo., one of the hottest real estate markets in the country, you get a lot of naysayers saying that cash-flowing properties are impossible to find. Maybe it's impossible for them, but it was relatively easy for me.

My agent gave me access to the MLS portal, where I would receive automatic email alerts each time a Denver metro property within my price range hit the market or decreased in price. After a month of running the numbers and declining various properties, I found one that might work.



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

Step #3: Analyze the property.

The property was a completely renovated duplex. Made up of two 1-bedroom, 1-bathroom apartments, this property had been on the market for two months (an eternity in Denver), with the price recently reduced to $400K. The property was located in an up and coming part of Denver, about 1.5 miles from where I work—an easy commute by bike or foot.

I asked property owners in the area what they were getting for rents. One of them told me what they were renting their 1-bedroom apartment for, and I knew I could get a little bit more, given mine was brand new.

With the assumed rent, I ran the numbers using the BiggerPockets calculators to see where my rents would need to be in order to cash flow (or live for free). The numbers did not work. I would be losing ~$750 per month. While this is cheap "rent" (in quotes because I would be paying myself) and I'd be benefitting from the loan paydown, it was not good enough.

What did I do? I decided it was impossible to find a property in Denver. So I continued watching reruns of Desperate Housewives.

Just kidding. I asked myself, “How can I make this property work?”

Given the location and the new build, I knew it would be possible to rent this on Airbnb. After doing some research, I determined that I would be able to make ~$1,000 per month by renting out my bedroom while making a pseudo-bedroom in the living room where I could sleep. With an extra ~$1,000 per month, I would be cash flowing $250 per month on a duplex that is walking distance from the office.

That works for me.

Step #4: Make the offer.

After talking it over with my agent, we decided to put an offer in. My first offer… Eeeek.

We ran the numbers again and determined a price point of $360K. While not a complete lowball, this gave us enough wiggle room for the negotiation.

[Side note: I know many people say, “If you’re not embarrassed by your offer, it’s too high.” In many smaller or buyer’s markets, I agree. However, in a booming seller’s market like Denver, there are multiple buyers lined up at almost every property, so a lowball could easily be ignored by the seller.]

Over the next few days, we negotiated back and forth and ultimately settled at $385K selling price. Once the negotiation was settled and the offer was accepted, I sent over the earnest money.

Step #5: Perform due diligence and close on the property.

Immediately upon acceptance, I let my lender know that I had a property under contract, so they could start their diligence and meet the required timelines.

We got the inspection (including a sewer scope) done with only minor tweaks to the property required including the installation of a railing, grounding electrical wires, and making sure all of the doors fit properly. The seller fixed them without a problem.

The lender hired an appraiser, and the property came back at $390K. Given the sale price of $385k, that means I built $5,000 of equity immediately upon closing (woohoo!).

It took the lender two to three weeks to underwrite the loan.

On June 17, 2017 (one month after offer acceptance), we were ready to close. I brought a cashier's check to the closing and sat down with the seller, my agent, and the title company. We reviewed and signed all of the documentation. After an hour and a few hand cramps, I was officially a property owner.

Step #6: Find tenants.

Pre-showing

In many (if not all) states, it is illegal to have a lease signed before the property is closed and in your possession. However, I found that there was nothing stopping me from advertising and showing the place during the closing process. This is exactly what I did and what I recommend you do to reduce the initial vacancy.

Once the property was under contract, I created a rental listing using Zillow Rental Manager. This service creates one listing and uploads it in a nice format to Hotpads, Trulia, and Craiglist.

Once the inquiries started to come in, I scheduled a brief, 10-minute phone call to gauge the credibility of the potential tenants. I did not want to waste time showing the property to unqualified tenants. In the call, I asked the following questions:

  1. Where do you live now?
  2. How much is the rent?
  3. Why are you moving?
  4. What is your (and your spouse’s) annual salary?
  5. Do you like/get along with your current landlord?
  6. Do you have any pets?
  7. Have you ever been evicted?

If they answered these questions to my liking, we would set up a time for a showing.

Showing

Because the place was brand new and already in “show condition,” there was not much for me to do. I immediately began to show the property. The apartment is pretty small, so the showings typically would not last longer than 10 minutes. I would meet the potential tenants at the property, talk with them for a few minutes, and then give them the tour.

After I showed them around, I would go outside and let them explore the apartment by themselves. That way, they could talk amongst themselves comfortably without me butting in.



Related: Meet Tim: How One Newbie Investor House Hacked a Duplex With No Prior Experience

Post-Showing

Once I received interested tenants, I collected a $40 application fee to confirm interest and pay for the background/credit report. As part of the screening process, I made sure the following boxes were checked:

  1. Obtained credit report and confirmed credit score of at least 600
  2. Performed a background check and confirmed there was no criminal record
  3. Requested the last two pay stubs to confirm annual salary
  4. Called two or three previous landlords
  5. Called employer to make sure jobs were stable AND that pay stubs matched what was reported

Once the boxes were all checked, I let the tenants know that they had been accepted.

Step #7: Sign the lease with your tenants.

I closed on the property at 10:00 a.m. on June 17th, and at noon on June 17th, I signed the lease with my tenants. We met at the property, and I ran them through the lease. I also created a “layman’s lease,” which is the lease in an easy-to-understand PowerPoint presentation, without the legal mumbo jumbo.

They signed the lease, and the process was complete.

Conclusion

There you have it—my first house hack. It went extremely smoothly, with few hiccups. I know you hear all about the crazy stories that happen, but again, I would bet that this is the exception rather than the rule.

Did I get the best deal in Denver? Probably not.

But I am certainly better off than those who passed on this deal because they let their inner Chicken Little get the best of them.

My suggestion for those still looking to find their first purchase is to just do it! You’re not going to get rich from one property. So stop trying. Real estate is a get rich slow game.

Even if you lose money, you’ll learn valuable lessons along the way, and in 20 years, you will be glad that you purchased the property. Just ask anyone who has owned a property for 20 years.

Good luck!

Where are you on your journey to land your first deal?

Leave your questions and comments below!

Craig Curelop, aka thefiguy, is the author of The House Hacking Strategy and a driven pursuer of financial independence. Sta...
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    Dario Barron
    Replied about 3 years ago
    First time ever posting anything on Bigger Pockets! I am just starting to gather information and this article was quite helpful. Will refer back to this if I do get into a house hack. I am eager to see what else this site will offer in terms of information. No doubt that I will learn a lot in the next coming weeks, months, and years. Do you think a first-time house hacker should focus on finding a property that does not need any renovations?
    Craig Curelop Real Estate Agent from Denver, CO
    Replied about 3 years ago
    Hey Dario! Thanks for reading and I’m glad you started interacting. The BP community is great and you have a lot of people here willing to help out. BiggerPockets has a wealth of information between the forums, blogs, webinars, podcast, books, videos, etc. It’s a great resource to answer any questions. I don’t think a property with no renovations should be a make or break criteria for you. You’ll learn a lot through some renovations, especially if it’s just cosmetic. I wouldn’t get into anything that has major foundational issues, but a little bit of repairs is a good way to build equity.
    Jesus Moreno from Albuquerque, New Mexico
    Replied about 3 years ago
    Craig, great article! I really enjoyed reading it. I have always been a person that, when given a procedure, cam follow directions and duplicate. So this procedure was awesome! My only question is on the following part… ” I then went through the process of getting pre-qualified with 4-5 different lenders ranging from big banks to local credit unions” My question is by getting pre-qualified with 4-5 different lenders would that not lower your credit score, because of the multiple inquiries, because in order to get pre-qualified you have to get your credit score pulled? please correct me if I am wrong. The reason I ask is because I am in this specific step of your process.
    Craig Curelop Real Estate Agent from Denver, CO
    Replied about 3 years ago
    Hey Jesus, Thank you! I’m glad you liked the article. You can get pre-qualified with multiple different lenders with only one “knock” to your credit score if the hard credit pulls are within 30 days of each other. So be sure to have all of your information lined up and to get prequalified all within a few days of each other. Hope this helps!
    Jesus Moreno from Albuquerque, New Mexico
    Replied about 3 years ago
    Excuse my ignorance, but what is the benefit to getting pre-approved by different lenders?
    Jane Goff
    Replied about 3 years ago
    I’m guessing that lenders have multiple programs which gives the borrower more flexibility.
    Cody Z. Rental Property Investor from Belmar, NJ
    Replied almost 3 years ago
    Craig, Thanks for this! Put in my first offer today, and I can’t say how much this put me at ease. Great strategy, and a reminder that a step forward doesn’t necessarily mean two steps back if everything isn’t perfect. All the best, Cody
    Frank Macias Rental Property Investor from Bonita Springs, FL
    Replied over 2 years ago
    Craig, I am so pumped to get my first house hack deal underway. I can’t wait!
    Andrew Lee Rental Property Investor from Cleveland, TN
    Replied about 2 years ago
    Great job, Craig! I’m hoping to get my son into house hacking when he turns 18 and starts college. We’ll use your steps here as a blueprint. Very exciting.
    Roderick Mills Jr. from Cincinnati, OH
    Replied almost 2 years ago
    I really liked the detail you included in the article and how you laid out what questions to ask potential tenants so you weren’t wasting your time! Looking to do a house hack soon in the Cincinnati area and will definitely be using this as a guide!
    Roderick Mills Jr. from Cincinnati, OH
    Replied almost 2 years ago
    I really liked the detail you included in the article and how you laid out what questions to ask potential tenants so you weren’t wasting your time! Looking to do a house hack soon in the Cincinnati area and will definitely be using this as a guide!
    Sandra Ceja from Los Angeles, California
    Replied about 1 year ago
    true statement Craig, we are often afraid of taking the firs step into investing because of the financial risk, but if you don't risk you don't win. Your story is very inspiring, I'm about to take my test to become a Real Estate Agent, I would like to become an investor and house flipper, but first I want to learn the regular selling/buying trade by being a sales person, then I will focus on investing/flipping properties. Thank you for your advice.