It’s official! Gina and I have now officially been investment property owners for a full year! Over the last year I can honestly say that we have learned way more than we thought we would. House-hacking has benefited us financially and has allowed us to get started in real estate investing.
For those of you who are unaware we purchased a 4-unit multi-family-home. We currently live in the smallest of the four units and rent out the remaining three to long term tenants. The rents that we collect cover our mortgage and then some, which allows us to effectively live rent free!
This strategy is called “house-hacking” and we’ve written an entire house hacking series that will answer all of your questions đŸ‘‡đŸ‘‡:
- The House Hacking Series: Part 1 – Covering The Basics
- The House Hacking Series: Part 2 – How to Landlord
- The House Hacking Series: Part 3 – Finding & Analyzing Properties
- The House Hacking Series: Part 4 – The Round Up
Anyways we’ve seriously learned a lot through this entire experience and since it’s our 1 year anniversary đŸ¥³, we wanted to share some of things we’ve learned.
Buying Your First Property
Before we even thought about buying a property we had done years of research by reading books, listening to podcasts, and attending real estate meetups. Through our research, we learned some of the steps you should take when buying an investment property.
Step 1: Review Mortgage Options
Unbeknownst to many, a 20% down payment is not your only option. Yes, a traditional mortgage normally requires 20% for a 30 year period, but there are other options such as an FHA or VA loan. An FHA loan is for first time home buyers and only requires a down payment of 3.5%. VA loans are for military veterans and don’t require any down payment. These are just two alternative loan options and as you would guess these can be extremely beneficial and allow you to start investing sooner. My advice to you is do your own research and then speak to a bank lender about your options.
Step 2: Get a Pre-Approval
After you’ve reviewed your loan options you want to receive a pre-approval letter from your bank lender. This letter will tell you how large of a mortgage the bank is willing to lend you based on your financial situation. Knowing how much your pre-approved for will allow you to target realistic properties.
Step 3: Choose a Market & Identify Wants
Now that you have a pre approval in hand you want to decide what locations your interested in and identify what you want and don’t want in a property. For example, Gina and I knew that we didn’t want a complete fixer upper and we also targeted 4-unit buildings. Knowing your wants will help your agent find properties that you actually want to look at.
Step 4: Find the Right Agent
Finding the right agent is essential and can sometimes be very difficult. For some odd reason not all real estate agents are real estate investors. Thus if your looking for an investment property you really want to find an agent that is also an investor. Having an agent with investor knowledge in an area that your looking to invest in will be super helpful in finding the right property. A great place to find an agent is through biggerpockets.com. Go to the forums and ask for agent recommendations in your area.
Taking these 4 steps will help you find and purchase your first investment property.
Business Accounts, Bookkeeping, & Taxes
After purchasing our property one of the first things we did was open separate bank accounts solely for the business of our investment property. Creating separate accounts allows us to keep our bookkeeping clean and organized which makes tax filing much easier.
As far as bookkeeping goes there are a ton of options. After speaking with our accountant she recommended going with a free software since we only have one property. We currently use the software Wave for our bookkeeping needs and really can’t complain.
As I mentioned, we have an accountant that we work with to file our investment property tax returns. Finding a solid accountant that is familiar with real estate is worth looking for. Gina and I found our accountant through a local real estate meetup and have had a great experience working with her.
Important Take Aways:
- Create separate bank accounts for your property.
- Use a bookkeeping software that suits your needs.
- Network and find a quality accountant with a real estate background.
Finding / Dealing With Contractors
A great way to find contractors, plumbers, electricians, etc. is to ask the prior landlord for a list of the people they used. Contractors typically prefer to work on homes that they are familiar with especially if they had good relationships with the prior landlord.
After you’ve developed a list of contractors you now get the joy of dealing with them. No joke this seems like a world phenomena contractors can be tough to deal with. If you find a contractor that answers the phone whenever you call and completes every job on time then you have found yourself a rockstar. Keep that rockstar close and treat them well because they are not easy to find.
Important Take Aways:
- Ask the previous owner for contractor references.
- If you find a quality contractor keep them close and treat them well.
General Maintenance / Landlord Responsibilities
Every property requires some general maintenance whether it’s annual hvac servicing, testing carbon dioxide/smoke detectors, cleaning gutters, cleaning chimneys, or winterizing your home. These things need to be done. Our advice to you is to create a list for all the general maintenance that needs to be done quarterly, biannually, and annually.
Since we live in our investment property, we take on a lot of responsibilities that we’d normally hire out such as raking, and snow blowing. I know this doesn’t sound like a benefit because raking and shoveling sucks but the money we save from doing the work ourselves is definitely a benefit.
Take Aways:
- Create a general maintenance list that’s specific to your property.
- If you can do the work yourselves you can save big time.
Dealing With Tenants
In our one year of being landlords we have been quite blessed with our tenants. One of the keys to dealing with tenants is to remember that they are your tenants and not your friends. I know it sounds harsh and I’m not saying that you shouldn’t be friendly.
What I am saying is that they signed a lease with specific rules they have to follow and it’s your job to enforce those rules. For example, if your lease calls for a fee for late rent then be sure to collect that rent. We’ve learned from other landlords that if you give tenants an inch the take a mile, so enforce your leases.
We’ve also found that treating your tenants well can pay off big time. If your tenants feel valued, they will in turn treat the property with more respect and won’t want to leave. We like that for the obvious reason of less vaccines and a well-kept property. We  give our tenants birthday gifts as well as holiday cards/goodies. These minor acts of kindness are greatly appreciated and helps differentiate us from other landlords the area.Â
Take Aways:
- Remember your property is a business and your tenants are your customers, don’t let them take advantage of you.
- Treat your tenants well… It’s the small things that matter.
Closing Thoughts
Being a landlord so far has been a great experience. There has been some challenging times but overall it’s been a great learning experience. House – hacking has provided a serious impact on our savings and we recommend this strategy to basically everyone. This strategy will not only allow you to increase your savings but will also help get your feet wet in real estate. If you have any questions at all about house hacking or landlording please leave us a comment below.đŸ‘‡đŸ‘‡
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