I think that my experience as a brand new "House-Hacker" can be beneficial to some other Newbies out there. I wanted to share what I believe are the top three surprise benefits to being a house hacker over starting with a flip, rental, or other property that investors don't live in.
Well here goes:
1) Being a homeowner is a challenge in and of itself.
As a renter, you have it pretty good (except for the financial situation thing) - you don't have to repair the clogged drain, the faucet, or the outlet that goes bad. As a homeowner, you've got to fix that all yourself.
It's not that easy. For one, I started with NO TOOLS. I probably have spent $500 or more acquiring drills, wrenches, hacksaws, plumbing and electrical equipment, shovels, a ladder, and dozens of other items that you just might not own as a sheltered, spoiled renter (like me). I'm definitely glad that I had a month to work on my own side's problems and collect a basic understanding of how houses work before having to deal with tenant problems!
2) You are there for the emergencies.
Emergencies happen - as I learned all too well in my first week of investing. Because I'm an idiot, I thought I would save some money by shutting the heat off in the other unit of my property (I live in Denver and it was bitterly cold this particular week). When I turned the heat back on to work on the kitchen in that unit, BAM - a pipe burst.
Experienced investors know to simply shut off the water and call a plumber - which I eventually ended up doing. But to me this was a wild new experience - it certainly felt like an emergency to me! I'm just glad I was there, this happened during the day, and I didn't have to deal with this problem over the phone with a tenant in a situation that I didn't have direct, and immediate control over.
In this future, this emergency and others like it, won't even be an "emergency". But as a totally green investor, I'm glad I was there.
3) I can go above and beyond the bare minimum amount of effort required for a return - it's for me!
Another thing that I personally consider an advantage to House-Hacking is that this property is more than an investment that is expected to generate a return - for the time being it is also my home!
Because it is my home, I spend a lot of time improving it. I've installed lights, I'm planting a tree (a surprisingly in-depth process that involves having the city come and paint my gas lines, water lines, etc), added some vanities that I like for my own bathroom, added a nice little rack for my hats and belts, and am looking forward to putting up a fence and painting and restoring two decrepit sheds that came with the property.
I just wanted to share my thoughts and see what other people had to say. Does anyone else experience these advantages or believe that House-Hacking has other advantages that are more subtle than the obvious financing ones?
@Scott Trench - thanks for the insight. I'm working toward doing a house-hack for my first investment property as well , so it's interesting to hear your experiences. I plan to be a hands-on landlord too with the first few properties. I take it you're in a duplex? What kind of financing did you use (FHA, VA)?
Scott Trench, I loved your message! I have a question, though. What is "house hacking?"
Scott, thats awesome. Hopefully we will be doing this soon enough. How much work did your duplex need?
Glad to hear it's worked out for you. I bought my first home in DC four years ago and rented out extra bedrooms and the basement. It more than paid my mortgage and gave me a lot of practical experience. Just like you I accumulated plenty of tools and knowledge, and know what to do in most "emergencies." I also got a nice place to live in and the pride of ownership. Now I'm recently married, no more roommates, and my wife and I are looking for our second property. I'd definitely recommend "house hacking" to anybody looking to get started and ease into things.
I'm with Judy what do you call house-hacking. I know it is something that is already been done over and over and is not new because as the old children's book goes there is nothing new under the sun. And in the 60 years I invested that held true, it was done somewhere by somebody before I did it, even the few times I was sure I had invented it.
It appears from your post it is nothing more then occupying a property you own but today it is cool, a term from my generation, to give computer terms to things and sayings So is that all house-hacking is, relabeling?
House hacking = renting out rooms :)
Yes to everything you said! My only piece of advice is be careful you don't "over improve" because it's your home! We made that mistake on our first home. Now we only do what will need for rentals and no more. The rest of the money is put into buying more homes or traveling.
Luckily, in Denver, frozen pipes are not a CONSTANT worry. There will always be those days though. Hopefully there wasnt too much damage to your property or pocketbook. Seems like that might be especially frustrating when the next day is is 70 & Sunny, as it is so often.
Not sure about relabeling, but house-hacking is a term often used on this site to describe. renting out rooms or living in one of the units of a multifamily while you rent out the others.
@Eric Robinson Yes - I purchased a Duplex. I used FHA financing AND the property was in Foreclosure. Also - thanks for the clarification on the House Hacking!
@Judy P. and @Brian P. "House Hacking" is an invented term that I give credit to Brandon Turner for. I suggest that you read his article on the concept found here:
@Elizabeth Colegrove Thanks for the heads up - I definitely don't think I'm putting anything in that is over the top yet though!
@Mitch H. You are correct about the weather, although that actually scares me a bit. The problem with burst pipes isn't that they freeze - it's that they UNFREEZE! That means the the wild swings in temperature can make my problem even more common.
This is great @Scott Trench ! I'm tweetin' it!
This post is great!!! Thank you for the advice, and insight!
Well, then it is merely relabeling a concept that is over 300 years old. Being born on a farm I would call it secondary harvesting. Ever notice in some orchards there is a row of crops between the trees, the farmers discovered how to make more money by planting something between the trees to harvest besides what came off the trees.
One of the best books I ever read on "Hacking",[ still seems like a stupid name to me but what would I know, my first experience with computers was in 1960 and it took four floors of a high rise in S.F. to do what a laptop can do today} any way it was written by a Walnut Creek Real Estate Broker in California over 40 years ago. Sorry, maybe there is a copy gathering dust in a library somewhere, I can't remember her name but we worked a few of the same areas and I liked her a lot, smart and good looking just like me. That comment was so my wife could have a laugh.