Let’s say you’ve been looking for a cost-effective or innovative way to acquire your first Honolulu investment property. Then house hacking could be your solution! House hacking is when investors purchase a property with multiple rental units or with the potential to be converted into multiple rental units, live in one of the units, and then rent out the remaining units to tenants.
The idea behind house hacking is to use the money your tenants pay in rent to pay your mortgage and other property costs, allowing you to live in your house for free while the value of the property appreciates. It is an attractive offer, especially if you are starting as an investor in real estate. However, as with any investment, this strategy has pros and cons. Before you try house hacking for the first time, you should know a few things.
House Hacking Basics
The practice of house hacking can provide investors with a variety of advantageous opportunities. Therefore, you may be surprised at how few individuals acquire properties using this method. There is no question that, if done properly, residing in your Honolulu rental property can assist you in paying your mortgage or rental bill, give your property time to increase in value, and provide some fantastic tax benefits as well. This can lead to significant savings for future investments or use the equity in your rental property to reach certain financial objectives.
Is House Hacking Right for You?
Although there are some advantages to house hacking, there are also some drawbacks.
The Reality of Landlording.
For instance, you would spend a lot of time leasing and managing your property in exchange for living virtually rent-free. You should take landlording seriously because it is a real job. Unless you plan to have your rental property professionally operated by a Honolulu property manager, most house hackers handle the majority of the responsibilities associated with rental property ownership.
Living with Tenants.
Another essential fact to remember about house hacking is that you will reside with the tenants. While you may not all reside in the same apartment, your tenants will be so close by that you will frequently interact with them and put up with their noise, pets, vehicles, and even personal property. Maintaining a professional relationship with your tenant may be more difficult if you live in such close proximity, and frustrations may flare if you find your tenants to be less-than-ideal neighbors. Nonetheless, house hacking could be fruitful if you are fine with such procedures or if you find a decent tenant.
Desired Lifestyle.
Be sure to consider your willingness to live in an investment property as you brainstorm all the scenarios you might encounter as a house hacker. New investors frequently start by picking properties that are less expensive. Ensure that you will feel comfortable living on the property if you intend to do so. Your first investment property might not exactly be your ideal home, which can frustrate some people. However, if you don’t mind temporarily reducing your standard of living, house hacking might be the best way to start investing in real estate.
Zoning Laws & Neighbors.
The last thing you should consider is your area’s zoning regulations. In many locations, dividing a residential property into two or more rental units is illegal. Thus, carefully review local zoning laws before making an offer. Even if it is legal, it’s possible that your neighbors won’t be happy about your plans to move several tenants into your new rental, especially if the neighborhood doesn’t have a lot of multi-family homes. Although you cannot control how other people feel, you can attempt to convince them that you will be a responsible landlord by addressing and talking with those who live in the neighborhood. A simple, pleasant conversation can go the extra mile to help your neighbors adjust to the fact that you and your tenant will be moving in next door.
Are you looking for a new Honolulu investment property? Or, are you interested in learning more about how professional property management can facilitate real estate investment? Contact Real Property Management Honolulu online today or call us at 808-445-9500. 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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