How I encouraged (convinced) my Wife and family to "House Hack".

My wife and I were transferring (Navy) from San Diego, California to the Florida Panhandle (Panama City Beach). At the time we had our 5 year old daughter with a goal of adding one more child to the fam-bam while on shore duty.

We decided we wanted to buy a home in Florida because compared to California, the houses were very affordable. My wife and I are focused on our finances and believe in making our money work for us. I am the type of person who would live on top ramen and kool aid in order to find the money to invest. My wife on the other hand, is my grounding rod when it comes to enjoying life for what it is. She constantly reminds me to stop and enjoy the fruits of my labor, however she knows that working hard makes me happy and feeling accomplished. We always work together to find a compromise between my endeavors and our enjoyment.

Me and my beautiful wife Hope.

We hit a wall while deciding which home to purchase in Panama City. We had not yet become real estate investors. I was involved in other businesses however wanted to focus on passive income through the newly coined "House Hacking" as our way of entering the real estate game.

I was dead set on purchasing a Duplex. The idea of living in one side while renting out the other to supplement mortgage payments seemed like a no brainer. There was only one thing I failed to realize: My wife was COMPLETELY against living in a duplex! Every time I brought up the idea, we got nowhere. I was against spending money on a single family home (SFH) because we were only going to be stationed in Florida for 3 years and planned to rent the property upon transferring back to the west coast. The cashflow of a SFH is nothing compared to Multi Family (MF) and we were both against renting.

There we were - against renting - against SFH - and against MF - which left us ..... nothing!

Finally I decided to do what the military had taught me for the previous 10 years - Circumvent the obstacle, Eliminate the Enemy, complete the mission!

Im kidding! If I did that my wife would hold me captive in a culvert and force me to watch re-runs of the bachelor while folding every article of laundry except the towels. She would literally cancel my birthday!

Back on track:

What I really did was sit my wife down and simply ask WHY she didn't want to live in a duplex. Again, as my grounding rod to reality, she reminded me of how I hate living on top of others, sharing walls with people, and also that once we had our baby - we would have no control of the neighbors noise levels during nap time. All VERY solid points. Things I was blinded to because my goals frequently fog my view of the present.

What she didn't say - is that we COULDN'T buy a multi family property. She said we couldn't SHARE a wall! AHHH HA! There was the compromise I was looking for. It is funny how simply COMMUNICATING with your spouse will allow you to find a SOLUTION.

With a clear understanding, I narrowed my focus to the properties that met both of our needs. After a week of sifting through the MLS, I found it!

A 3 bedroom, 2 bath home with a 2 car garage and a yard for the dogs. Everything on our checklist for the family was covered. As for "house hacking", the property had two cottages on the backside of the yard, behind a large wooden fence, with private parking and alley access. The cottages were far enough away to feel like neighbors, the home was large enough accommodate our needs, and the neighborhood was safe. Perfect!

I called the realtor and lined up a viewing. I didn't tell my wife about the cottages because I first wanted to see if she liked the home. During the walk through, my wife fell in love with the house's historical charm. It had a fireplace, built inns, and beautiful maple flooring which I cant even explain how it was laid:

Every Room had this beautiful flooring pattern:

The back yard with the fence covered in Jasmine (You can see the cottage as well):

Once my wife told me she loved the house, it was time to tell her about the cottages. Keep in mind we were not yet in real estate investors. My wife was skeptical about investing our money into real estate BEFORE we owned our own home. This was a brand new concept I had been planning (scheming) for a while and was ready to drop the bomb. IT WAS A BIG DEAL OKAY! ---  I had covered all of my tracks. We were not sharing a wall, nor were we investing in real estate before we owned a home our self - it was at samesies.

"And babe, since you like the home so much, check this out! It has two cottages on the back with paying tenants!"

Her Reply: The Peoples Eyebrow

For those of you unfamiliar with the Peoples eyebrow - Grow Up!

Needless to say we walked around the back of the property and checked out the cottages. They were not in great shape.  The tenants were so-so but it was clear that the previous owner did little maintenance on them. Regardless - they were paying $500 p/month each.

My wife quickly did some math. Our mortgage was looking like $1250 per month.

"We could live here for $250 a month??!!??" - "holy $H1+" - she said.

We ended up purchasing the home for $205,000. Our PITI Mortgage (principle, interest, tax, insurance) was $1250. The previous tenants leases were up shortly after we purchased and I quickly renovated each unit. Both cottages had beautiful hardwood floors underneath the nasty looking carpets. I spent a total of $1,500 per unit to renovate and about 3 weeks of my time. The result was a rental increase from $500 per unit to $750 per unit.

Our units were bringing in $1500 per month with a mortgage of $1250 and a water bill of $200 p/month.  My wife and I were being paid $50 to live in this great home. Now that is what I call House Hacking!

After three years of house hacking, and reinvesting our savings - we now own 21 rental units and are growing at a respectable rate. We would have likely never started had we not communicated our wants and needs. By finding a compromise, we now ENJOY being real estate investors and are blessed with a monthly passive income which will allow us to retire at a very young age. It all started with one "House Hack" which increased our ability to save more than we would ever be able to on a military income alone. Our savings from house hacking allowed us to purchase more properties and increasing our cashflow. 

We have since moved back to San Diego California and are looking to house hack again. We began to rent the 3/2 home in Florida for $1500 a month, and the two cottages at $750, for a total monthly cashflow of $1,500 p/month from a property we used our VA (0% down payment) to purchase. That is a 100% cash on cash return.

On top of that, we began to short term rental (AIR BNB) one of the cottages which brought in an additional $1,000 profit above long term income last month. Here are some pictures of the cottage after renovations:

The following is a list of lessons learned about our first "house hack":

1.) Your tenants are your neighbors. Ensure you have you unit renovated to a level that will attract neighbors you want to live next to. I originally attempted to do the minimum upgrades in order to save money, however it came at the expense of having lower class tenants who were not good neighbors of tenants. Once I renovated the units with the thought of making it something I would live in, I ended up getting tenants with morals and values along the same as mine. This made for a much better landlord/tenant/neighbor experience.

2.) If you are househacking as a family - come up with a list of things you need in a home to be comfortable (bedrooms, yard size, floor plan, garage, pool ect), as well as a list of things that will make you uncomfortable (sharing a wall, lack of privacy, interacting with tenants, handling repairs ect.) Once your family has decided on the ideal property, now you can narrow your search. In the end, you may have to compromise with privacy or space in order to get a much lower mortgage. Determine if this is a short term experience to allow you to save for a dream home and eventually rent them all out, or if it is a lifestyle. This will guide your purchasing priorities.

3.) Consider doing short term rentals. We waited too long to make the conversion. Having a short term rental has many benefits. It allows you to use the furnished space when guests come in to town, has a potential to bring in much more revenue, you can make additional income from cleaning fees if you dont mind the labor, and most of all - if you dont like the tenants, the relationship is short term!(Check your local city offices for any short term restrictions) 

Hope you all enjoy our experiences. Please let me know if I can be of any help.

Please share your thoughts or experiences as well. If you have any questions, please respond on the post rather than PM me. This allows everyone to gain the knowledge vice one person.

Thank you all - Ramsey Blankenship