Suppose you have been searching for a cost-effective or innovative method to purchase your first Hot Springs investment property. Then house hacking could be your solution! House hacking is when investors purchase a property with multiple rental units or with the potential to be converted into multiple rental units, live in one of the units, and then rent out the remaining units to tenants.
Using your tenants’ rent to pay your mortgage and other property costs is the idea behind house hacking, which allows you to live in your house for free while the value of the property appreciates. It’s a tempting proposition for many, particularly if you’re just getting started as a real estate investor. But this strategy has advantages and disadvantages, just like all investments. Before you try house hacking for the first time, there are a few things you should know.
House Hacking Basics
House hacking can provide investors with a variety of excellent benefits. The fact that so few people choose to use this method of property acquisition may therefore surprise you. There is no question that, if executed right, residing in your Hot Springs rental property can assist you in paying off your mortgage or rental payment, give your property time to appreciate, and provide a number of superb tax advantages. You could use the equity in your rental property to help you reach some of your financial objectives or use it to save money for future investments.
Is House Hacking Right for You?
House hacking does have some drawbacks, though, that come together with these advantages.
The Reality of Landlording.
For example, you would have to invest a lot of time in leasing and property management in exchange for living virtually rent-free. Being a landlord is a legitimate vocation that you must take seriously. Unless you plan to have your rental property professionally operated by a Hot Springs property manager, most house hackers handle the majority of the responsibilities associated with rental property ownership.
Living with Tenants.
Keeping in mind that you will live with your tenants is another crucial aspect of house hacking. Even though you might not all live in the same apartment, you will likely see your tenants regularly and have to put up with their vehicles, pets, noise, and even personal property because of how close they are to you. Living so close to your tenant may make it more difficult to maintain a professional relationship, and outbursts may occur if you find your tenants to be less-than-ideal neighbors. Nonetheless, house hacking could be fruitful if you are fine with such procedures or if you find a decent tenant.
Desired Lifestyle.
Make sure to account for your willingness to live in an investment property as you consider all the scenarios you might encounter as a house hacker. It is common for novice investors to begin with low-priced properties. If you intend to reside on the property, it is essential to ensure that you will be comfortable. Some individuals may experience frustration if their first investment property is not their ideal residence. However, if you have no problem reducing your lifestyle for a few years, house hacking could be the ideal way to enter the real estate investment market.
Zoning Laws & Neighbors.
Local zoning laws should be the final consideration on your list. In many locations, it is illegal to divide a residential property into two or more rental units. Thus, carefully review local zoning laws before making an offer. Even if it is permitted, you might discover that your neighbors are not happy about your plans to relocate multiple tenants into your new rental, especially if there aren’t many other multi-family rentals in the area. Even though you have no control over other people’s emotions, you can try to reassure them that you will be a trustworthy landlord by making an effort to interact with and speak to locals who live close to your rental home. Simple, cordial communication can go a long way toward making your neighbors more comfortable with you and your tenant moving in next door.
Are you looking for a new Hot Springs investment property? Or perhaps you’d like to grasp more about how professional property management can facilitate your investment in rental property? Contact Real Property Management Hometown online today or call us at 501-701-4702 or 501-303-6870. We work with investors like you to help build your dream rental real estate portfolio.
Originally Published on February 26, 2021
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