An interesting way to get your first Evanston investment property is through house hacking. 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 idea behind house hacking is to use your tenants’ rent payments to cover the mortgage payment and other property expenses. Basically, you would be living in your home for free as the property appreciates. To a budding real estate investor, this seems like an attractive idea. However, there are also a few things to consider before pushing through with 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. Done correctly, living in your Evanston rental property can help lessen or eliminate your mortgage or rental payment and allow you to enjoy some tax benefits, all while giving your property time to increase in value. 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 something you must take seriously. Unless you plan to have someone professionally manage your rental property, most house hackers do the vast majority of the management tasks themselves.
You also have to consider that house hacking means you are going to be living with your tenants. You may not share the same unit but your tenants will be close enough that you will see each other constantly as well as be living with their noise, pets, cars, and even personal belongings. This could make it harder to keep a professional distance between you and your tenant especially if tensions arise between you as neighbors. But if you do not mind such an arrangement or if your tenant is great, house hacking could work out for you.
As you go over the possible situations you could face as a house hacker, make sure you include 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. It is highly likely that your first investment property will not be your dream home, and this brings about frustration for some people. If you have no problem scaling back your lifestyle for a few years, house hacking could be the perfect way to get started in 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 are responsible for everything from the mortgage to the utilities. With a lease, you can encourage your tenants to pay their share of the expenses, but if something happens that makes them unable or unwilling to pay, you have to be able to pay your bills despite not having that 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 Evanston 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 Chicago Edge team is ready and willing to help you. Contact us online today or call us at 773-904-7700. 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.