Suppose you have been searching for a cost-effective or innovative method to purchase your first Gallatin Valley investment property. If so, house hacking might be the solution for you! House hacking is when investors buy a property with multiple rental units that either already exists or can be converted, live in one of the units, and then rent out the others to tenants.
The idea behind house hacking is to live in your home for free while the value of the property appreciates by using the rent your tenants pay to pay the mortgage and other property expenses. Many people find it to be appealing, especially if you’re just getting started as a real estate investor. However, as with any investment, this strategy has both pros and cons. Before you attempt house hacking for the first time, you should be aware of the following.
House Hacking Basics
Investors may benefit greatly from house hacking in a number of ways. You might be surprised at how few people use this method of buying properties. There is no question that, if executed right, residing in your Gallatin Valley 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. This can help to reduce costs for future investments or use the equity in your rental property to reach specific investment goals.
Is House Hacking Right for You?
Although you have all these advantages, house hacking also has a few disadvantages.
The Reality of Landlording.
In exchange for living virtually rent-free, you may be required to devote a great deal of time to leasing and managing your property. It’s important to remember that being a landlord should be taken seriously since it’s a real job. Most house hackers manage the bulk of the work required to own a rental property, unless you plan to have your property managed by a Gallatin Valley property manager professionally.
Living with Tenants.
You will live with your tenants if you decide to house hack, which is another crucial consideration. Perhaps you won’t share a unit together, but your tenants will be so close that you will see each other fairly regularly and have to encounter their pets, noise, cars, and even personal belongings. Living in such close proximity to your tenant may make it more difficult to maintain a professional relationship, and if you find your tenants to be less than ideal neighbors, things may get out of hand. However, house hacking could be very successful if you find a great tenant or don’t mind such arrangements.
Desired Lifestyle.
Be sure to include your eagerness to live in an investment property when you consider all the potential scenarios you may experience as a house hacker. New investors commonly start by selecting properties at lower prices. It’s crucial to make sure you will feel comfortable living on the property if you intend to do so. Your initial investment property might not be your ideal home, which can frustrate some people. House hacking, however, might be the ideal entry point into real estate investing if you have no problem lowering your standard of living for some time.
Zoning Laws & Neighbors.
Local zoning laws should be the final consideration on your list. A residential property cannot be divided into two or more rental units in many places. Therefore, carefully review local zoning ordinances before making an offer. If there aren’t many multi-family rentals in the area, even if it is legal, you might find that neighbors are not happy with your plans to move multiple tenants into your new rental. Even though you have no control over how other people feel, you can try to reassure them by making an effort to get to know and communicate with those who live close to your rental property. A simple, cordial conversation can go a long way toward easing your neighbors’ concerns about your and your tenant’s impending move.
Are you looking to purchase your next Gallatin Valley 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 Bozeman online today or call us at 406-586-2226. 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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