House hacking is one way you can creatively buy your first Honolulu investment property. 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.
In a nutshell, house hacking is using the rent that your tenants pay to cover your mortgage payment and other property expenses. This means you would be living in your home for free while your property increases in value. It is a very attractive idea for those who are new to real estate investing. However, there are some things you need to know before you proceed with a house hacking plan.
House hacking can offer investors a range of great benefits. So you would think many people use this strategy to acquire properties. If done correctly, you can live in your Honolulu rental property while eliminating your mortgage or rental payment, giving your property time to increase in value, as well as taking advantage of great tax benefits. Still, the few downsides to house hacking make it not suitable for everyone.
In exchange for living virtually rent-free, you will be spending a lot of time leasing and managing your property. Your job as a landlord is something you should be taking seriously. Most house hackers manage their rental property themselves instead of having it professionally managed.
You also have to consider that house hacking means you are going to be living with your tenants. You won’t necessarily be living in the same unit but your tenants will be so close by that you will constantly be seeing each other. You also will have to put up with the noise, their pets, cars, and often even their personal belongings. It might be harder to maintain a professional relationship between you and your tenant especially if your tenants turn out to be less-than-ideal neighbors. But if you don’t mind that kind of arrangement or you can find a great tenant, house hacking would be a great option.
As you consider all the possible situations you will find yourself in as a house hacker, you also have to assess your willingness to live in an investment property. A lot of new investors choose lower-priced properties at first. You have to be comfortable with the idea of living on the property. Usually, your first investment property will not be your dream home, and this can be a source of frustration for some. If scaling back your lifestyle for a couple of years is not a problem for you, house hacking may be the best way for you to get into real estate investing.
One other thing to plan for has to do with the possibility of your tenants not paying their rental payments. As the property owner, you are responsible for everything from the mortgage to the utilities. A lease helps encourage your tenants to pay their share of the expenses, but you have to prepare for the possibility of them becoming unable or unwilling to do so. You still have to pay your property’s bills without your regular income for at least a few months. It can take some time to evict a non-paying tenant, as well as find a new one, so starting a cash reserve account as early as you can is a wise move.
Are you in the market for your next Honolulu 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 Alliance team is ready and willing to help you. Contact us online today or call us at 808-427-0611. 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.