Are you looking for a way to buy your first Boston investment property? House hacking might be an answer to that. 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 to pay your mortgage payment and other property expenses using the rent from your tenants, letting you live in your home for free as the property appreciates. This is a very attractive idea especially if you are just starting as a real estate investor. However, you need to know a few things before you pursue your 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 Boston 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, there are a few downsides to house hacking.
In exchange for living virtually rent-free, you will be spending a lot of time leasing and managing your property. Being a landlord is a serious job. Unless you plan to have someone professionally manage your rental property, most house hackers do the vast majority of the management tasks themselves.
Another thing to keep in mind about house hacking is that you will be living with your tenants. Yes, you won’t be sharing the same unit with your tenants, but they will be so close by that you have to put up with the noise, their pets, cars, and even personal belongings. If your tenants turn out to be not the best type of neighbors, you could have trouble keeping things professional between you. But if you don’t mind that kind of arrangement or you can find a great tenant, house hacking would be a great option.
One of the things you also have to consider before pushing through with your house hacking plan is your willingness to live in an investment property. New investors tend to choose lower-priced properties at first. If you plan to live on the property, you have to be sure you are comfortable doing so. Usually, your first investment property will not be your dream home, and this can be a source of frustration for some. But if you are willing to scale back your lifestyle for a few years, house hacking will be a good entry into real estate investing.
One more thing to consider has to do with rental payments and what could happen if your tenants stop paying them. Since you are the property owner, you have responsibility for everything from the mortgage to the utilities. Although a lease can help encourage your tenants to pay their share of the expenses, you still have to be able to pay your property’s bills in the event that your tenants suddenly become unable or unwilling to pay, leaving you without that source of income for 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 Boston 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 Commonwealth team is ready and willing to help you. Contact us online today or call us at 617-299-2342. We work with investors like you to help build the rental real estate portfolio of your dreams.
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