Lessons learned from my first house-hacking experience

I bought my first home in May 2017, a 2BR condo in Atlanta, with the goal of finding a roommate to rent the room. My parents helped me add a door to the dining room so that it could then be used as a 3rd bedroom. 

In just the first few months of my house-hack, I learned a few key lessons, relevant to house-hacking a condo but which are also applicable to other real estate investment strategies. 

Lesson 1: Don't let your room(s) sit empty because you are waiting for the "perfect" roommate. 

I went to school in Atlanta, so I have many friends in the area. Ideally I wanted to rent out my rooms to friends/friends of friends. After I bought the condo, I had a couple friends who were interested but were not yet able to commit. 

In that time, I found 2 potential roommates who were looking to move in immediately. They would have likely been good fits, but I passed up on them because I was waiting on a couple of my other friends to confirm their living situations. 

Due to circumstances that were out of their control (job changes, family situations, etc.), my friends backed out, and it took another 1.5 months longer for me to fill the 2 spots. 

Lesson learned: even if it's for good friends and family, I should be very cautious about waiting to secure an alternate roommate and let the spots sit empty. It's just bad for my ROI. 

Lesson 2: Screen your tenants, even if they are friends of friends. 

I got lucky and found 2 tenants who ended up being solid. However in hindsight, I was pretty light with the screening process, partially because I spent too much time waiting for the "perfect" roommate, and I was feeling pressured to get people in ASAP. It worked out for me well this time, but in the future I will do more thorough screening, likely using The Biggerpockets Ultimate Guide to Screening Tenants as a reference point. 

Lesson 3: Have a tenant contract and review with your tenants, even if they are friends. 

As I mentioned, I got lucky with my tenants. I also at least had a pretty thorough contact drafted up. I used a modified version of a Georgia rental contract I found online. 

However, in one of the Biggerpockets Podcast episodes, the guest mentioned the importance of reviewing the entire contract with your tenants, so that they are fully aware of all terms and expectations. I failed to do this thoroughly, and while it has been okay so far, I can see that this could be a risk with future tenants, especially if they are not friends/friends of friends or if I am not living in the property as well. Going forward, I will be reviewing each detail of the contract with my tenants before they sign. 

Lesson 4: Prepare for the unexpected.

A couple weeks ago, I had my first major appliance issue: my washing machine broke. Ultimately, because my tenants are paying to have a washer and dryer, I had to resolve the issue more quickly because other people besides myself are impacted. 

I had done no preparation for issues like this (washer/dryer breaking, AC going out, refrigerator breaking, etc.), so I had to scramble to look up mechanics and figure out what to do. Ultimately, I decided to replace the washing machine because the cost of repair was going to be over 50% of the purchase price of a new washer.

Going forward, I need to think more thoroughly about the common issues that could happen and develop a plan for when issues do ultimately arise. Especially if it is a property where I am not living, I also want to figure out ways to remove myself from the equation so that I do not have to resolve every little issue that comes up. 

Lesson 5: As an investment property, condos have some challenges over single family homes. 

HOAs and rent restrictions can make condos difficult investments. 

It's common sense in hindsight: HOA fees hurt your margin as an investor. When I bought the property, I don't think I took that into full consideration. My fees every month are paying for a swimming pool, security, HOA employee salaries, etc. - all things I would not pay for if I was living in a single family home.

In my condo, the rent restriction waitlist is ~4 years, so I will likely move out in the next 1-1.5 years to transition to something that's more investor-friendly. If I had bought a single family home instead of a condo, I could wait a little while and then buy a second home as my primary residence, benefiting from the lower downpayment requirement for my second property. 

Overall, house-hacking has been a great way to learn about finding/managing tenants and learning about real estate investing before I acquire my next property.