An interesting way to get your first Hot Springs investment property is through house hacking. House hacking is when investors purchase a property that either has or can be converted into multiple rental units, live in one unit, and then rent out the others to tenants.
The concept behind house hacking is you use the rent from your tenants to cover your mortgage payments as well as other property expenses. This will result in you living in your home for free while the property’s value increases. This is an attractive idea to many new real estate investors. But before you go ahead with a house hacking plan, consider some of these things.
House hacking can offer investors a range of great benefits. It will surprise you to know how few people use this strategy to acquire their first property. When done correctly, you can live in your Hot Springs rental property, eliminate your mortgage or rental payment, give time for your property to appreciate, and enjoy some tax benefits as well. Still, house hacking is not for everyone due to a few downsides to the process.
In exchange for living virtually rent-free, you will be spending a lot of time leasing and managing your property. Being a landlord is something you must take seriously. Most house hackers don’t have their properties managed professionally so they end up doing most of the legwork involved in owning a rental property.
Another thing about house hacking is that you will be living with your tenants. You may not share the same unit but your tenants will be close enough that you will see each other constantly as well as be living with their noise, pets, cars, and even personal belongings. Maintaining a professional relationship with your tenant with these arrangements can be difficult and arguments might ensue between you and your neighbors. But if you do not mind such an arrangement or if your tenant is great, house hacking could work out for you.
As you go over the possible situations you could face as a house hacker, make sure you include your willingness to live in an investment property. Most new investors typically go for lower-priced properties at first. You have to be comfortable with the idea of living on the property. Your first investment property will likely be a far cry from your dream home, and this can be a source of frustration for some. But, if scaling back your lifestyle for a few years is not an issue for you, house hacking would be a good way for you to get into real estate investing.
Finally, you need to consider the possibility of your tenants not being able to pay rental payments. As the property owner, you are responsible for everything from the mortgage to the utilities. A lease can help encourage your tenants to pay their share of the expenses but you have to be able to still pay your property’s bills in case your tenants are suddenly not able to not willing to pay their rent, leaving you without that income source for a few months. It takes some time to evict a non-paying tenant and find a new one, so it is a smart move to set up a cash reserve account as soon as you can.
Are you in the market for your next Hot Springs investment property? Or would you like to learn more about how professional property management can make it easier to invest in rental real estate? The Real Property Management Hometown team is ready and willing to help you. Contact us online today or call us at 501-701-4702 or 501-303-6870. We work with investors like you to help build the rental real estate portfolio of your dreams.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.