In today’s article I’m going to be explaining why house hacking is not the smartest way to go, when getting started in real estate. Most people don’t want to put in any kind of effort and want money to magically start appearing out of thin air. If you’re thinking of anything along the lines of, “I’m going to pay the down payment for a double story house and I’ll pay for the rest of it from the money I’ll get for it by renting out the upper story of the house, ingenious!” Stop right there, you might as well start hoping a golden goose will just walk on your porch and lay golden eggs for you, for the rest of your life.
Here’s what you should know:
You Need to Spend Money Before You Start Earning Money
Let me explain, in order for you to start getting a solid income flow, you will need to own property. If you’re just going to give the money, you just got. What will you have? That’s right, nothing. You might be thinking, “I’ll just increase the rent.” But if you do that you’re not going to get any customers in the first place. Though if you’re still adamant on that, remember the old saying, easy come, and easy go.
Stop Taking the Easy Way Out
House hacking does seem like easy money, but it’s probably because you’re not aware of the cons. Remember the property you’re currently renting out does not belong to you yet. So, if your tenants are behind on rent and if they damage property. It’s you who is going to have to pay from your own pocket and that kills the whole point of everything. This is one major factor that most people do not consider and regret afterwards. Sure, there are some plus points to house hacking, like you may generate solid income overtime, you may possibly make good friends and if you look at it positively, you’re kind of living for free.
Lack of Privacy
When sharing the unit with other families (tenants), be prepared to listen to a lot of racket, potentially annoying kids and people who just don’t know how to stay in their boundaries. Many a times, your tenants will try to be “friends” and be real chummy, just to reduce the rent or to borrow a little more time to pay the rent. How you deal with all that depends on you but I’m sure nobody would ever find living in such situations pleasant.
If you can’t put up with annoying neighbors but still want to go with house hacking, I suggest you pay the down payment for condo in a place near your child’s college and have his friends or college mates stay there and pay the money. This way it’ll be way more convenient and you’ll be saving yourself a lot of trouble. You won’t have to deal with the problem of advertising the property for rent either! Sounds nice doesn’t it?
House hacking is not for everyone, you might have come across people who have successful earned a lot by it but this sweet dream isn’t as easy, though investors may swear by it. Investing in real estate is also a stellar way to earn income relatively easily but just as everything else, it involves risk. You can try that if house hacking doesn’t seem to cut it out for ya. At the end of the day, it depends on how you want to go with it.