Navy Fellas Realty Group

Real Estate, Residential sales and purchase

House Hacking Pros And Cons Explained

by

Have you ever heard of house hacking? It’s a real estate strategy that allows you to live in a property while renting out part of it to generate income. This approach helps offset your living expenses and can even pave the way to financial independence. Here’s a breakdown of what house hacking entails, along with its benefits and drawbacks.

What Is House Hacking?

House hacking involves purchasing a property, living in one part of it, and renting out the other parts. The most common setup is buying a multi-family property (like a duplex or triplex) and renting out the other units. However, house hacking can also involve renting out extra bedrooms in a single-family home or even converting parts of your property into rental spaces, such as a basement or garage apartment.

How Does House Hacking Work?

  1. Purchase a Property: First, you need to find and purchase a property that suits house hacking. This could be a multi-family home or a single-family home with additional rentable spaces.
  2. Live in Part of the Property: You occupy one unit or part of the property as your primary residence.
  3. Rent Out the Rest: You lease the other units or spaces to tenants. The rental income helps cover your mortgage, property taxes, and maintenance costs.
  4. Manage the Property: As a house hacker, you’ll also take on the role of a landlord, which includes maintaining the property, dealing with tenant issues, and handling leases.

The Pros of House Hacking

1. Reduced Housing Costs

One of the biggest advantages of house hacking is the potential to significantly reduce or even eliminate your housing costs. The rental income can cover a substantial portion of your mortgage and other property expenses, allowing you to save money or invest it elsewhere.

2. Building Equity

By owning a property, you build equity over time as you pay down the mortgage. This equity can be leveraged in the future for additional investments or major financial needs.

3. Real Estate Experience

House hacking provides firsthand experience in real estate investing and property management. It’s an excellent way to learn the ropes before diving into more significant real estate ventures.

4. Tax Benefits

As a property owner, you may be eligible for various tax deductions, including mortgage interest, property taxes, and maintenance costs. These tax benefits can make house hacking even more financially attractive.

The Cons of House Hacking

1. Landlord Responsibilities

Being a landlord comes with its own set of challenges. You’ll need to handle maintenance issues, screen tenants, and potentially deal with difficult tenant situations. This responsibility can be time-consuming and sometimes stressful.

2. Privacy Concerns

Living in close proximity to your tenants can lead to privacy concerns. You may have to navigate noise issues or conflicts that arise from shared spaces.

3. Upfront Costs

Purchasing a property requires a significant upfront investment, including a down payment, closing costs, and potential renovations. It’s essential to have a solid financial plan in place before embarking on house hacking.

4. Market Risks

Real estate markets can be unpredictable. Property values may fluctuate, and rental demand can vary based on the location and economic conditions. These factors can impact your rental income and overall investment.

Is House Hacking Right for You?

House hacking can be a powerful strategy for those looking to reduce living expenses and gain real estate experience. It is crucial to weigh the pros and cons and assess your circumstances. If you’re willing to take on the responsibilities of property management and are financially prepared for the initial investment, house hacking could be a rewarding path toward financial independence.

House hacking is more than just a trendy term in real estate. It’s a practical approach that can lead to significant financial benefits. By understanding the potential advantages and challenges, you can make an informed decision about whether house hacking is the right strategy for you.

Moving From An Apartment To A House? Here’s What You Need To Remember About Your Lease

by

Moving From An Apartment To A HouseThe major problem that the vast majority of buyers will run into – especially when purchasing their first home – has to do with a lease agreement that is still active with their apartment complex at the time of the purchase. If you locate the perfect home in February but your lease isn’t over until August, you can’t be expected to wait around.

But at the same time, the remainder of that lease agreement could represent thousands of dollars that you’ll be paying to essentially “live” in two different places at the same time.

Luckily, all hope is not lost. There are a variety of steps that you can take to help mitigate your remaining financial risk at your apartment as much as possible.

Breaking Your Lease Early: What You Need to Know

First, look at your existing lease agreement and make sure you understand their early termination policy. This will outline the various acceptable ways, usually dictated in large part by state and other local laws, that you can break a lease early without being forced to pay through the duration of the agreement itself.

Much of this will vary based not only on the state, but also the property manager in question. Your property manager may very well allow for early termination for home buyers – particularly if they’re in an area where they know they can rent the apartment quickly.

This is not always the case, though, which is why you need to begin by reviewing the situation thoroughly so you know what you’re dealing with.

Next, you should review what state laws have to say about your landlord’s duty to find a new tenant in the area of the country that you’re living in. In some states, for example, your landlord MUST make “reasonable efforts” to re-rent your unit as quickly as possible, regardless of the reason you’ve decided to leave.

Many state housing laws require landlords to make every effort to keep their own losses at a minimum – meaning that you may not have to pay much, if anything at all, to break your lease early provided that you give said landlord enough notice. 

Why Conversations Matter

Finally, you’ll want to sit down with your landlord face-to-face (if you haven’t already done so) and explain to them exactly what is going on. Landlords are people too and oftentimes they can be more sympathetic than you think.

According to an authority on the matter, the “worst case scenario” for most renters-turned-buyers breaking a lease agreement is often that they’ll need to pay an early termination fee to break their agreement early. This can be as little as one month’s rent to “a few month’s rent” depending on the situation.

At the very least, this is better than being forced to pay every month for the remainder of your term.

In the end, it’s important for you to understand that you should not let anything get in the way of buying the home you’ve always wanted – even if you’re currently living in an apartment with an active lease agreement.

You just need to know as much about the specifics of that agreement as possible so that you can move into your new home while mitigating as much risk as possible for both yourself and your landlord at the same time.

It’s wise to consult with your trusted home financing professional about the implications of your specific situation.

What To Know Before Investing In A New Property

by

What To Know Before Investing In A New PropertyAnyone looking to diversify their investments should consider investing in real estate. Because the value of property generally increases over time, this is a great way to use money to make money. Even though purchasing a house may provide a greater return than leaving that money in a savings account, purchasing property is still a major decision. Everyone has to take their time to evaluate each option carefully before purchasing an investment property.

The Time Required

Owning an investment property is not easy, and it requires a significant amount of time. Potential real estate investors need to evaluate the local market carefully, comparing any potential mortgage payment to the rental income afforded by that property. Landlords also have to identify long-term residents to generate a passive stream of income that will cover expenses related to the property. 

The Budget

It is also critical to think about all the expenses that come with owning an investment property. Property owners need to make sure they have enough income to cover not only the mortgage payment but also real estate taxes and homeowners’ insurance. Keep in mind that real estate taxes may be higher for an investment property when compared to a primary residence. Real estate investors should also make sure they have cash aside to cover any emergency repairs. 

The Location

The location will play a significant role in driving any potential return on that investment. Ideally, the property should be located near attractive employment opportunities, major roads, and other amenities such as shopping and restaurants. The most important factor in the value of a property is its location, and this is just as true with investment properties as it is with anything else. A property in a good location will likely appreciate more quickly.

Choose The Right Property For Real Estate Investing

There are numerous factors that everyone should evaluate carefully before deciding to purchase property. While real estate investing can provide a significant return, it also comes with a lot of expenses and responsibilities. Everyone has to make sure they have the time and money to properly manage an investment property. If so, investing in real estate could be a great way to diversify assets and build wealth. 

 

Moving From An Apartment To A House? Here’s What You Need To Remember About Your Lease

by

Moving From An Apartment To A HouseThe major problem that the vast majority of buyers will run into – especially when purchasing their first home – has to do with a lease agreement that is still active with their apartment complex at the time of the purchase. If you locate the perfect home in February but your lease isn’t over until August, you can’t be expected to wait around.

But at the same time, the remainder of that lease agreement could represent thousands of dollars that you’ll be paying to essentially “live” in two different places at the same time.

Luckily, all hope is not lost. There are a variety of steps that you can take to help mitigate your remaining financial risk at your apartment as much as possible.

Breaking Your Lease Early: What You Need to Know

First, look at your existing lease agreement and make sure you understand their early termination policy. This will outline the various acceptable ways, usually dictated in large part by state and other local laws, that you can break a lease early without being forced to pay through the duration of the agreement itself.

Much of this will vary based not only on the state, but also the property manager in question. Your property manager may very well allow for early termination for home buyers – particularly if they’re in an area where they know they can rent the apartment quickly.

This is not always the case, though, which is why you need to begin by reviewing the situation thoroughly so you know what you’re dealing with.

Next, you should review what state laws have to say about your landlord’s duty to find a new tenant in the area of the country that you’re living in. In some states, for example, your landlord MUST make “reasonable efforts” to re-rent your unit as quickly as possible, regardless of the reason you’ve decided to leave.

Many state housing laws require landlords to make every effort to keep their own losses at a minimum – meaning that you may not have to pay much, if anything at all, to break your lease early provided that you give said landlord enough notice. 

Why Conversations Matter

Finally, you’ll want to sit down with your landlord face-to-face (if you haven’t already done so) and explain to them exactly what is going on. Landlords are people too and oftentimes they can be more sympathetic than you think.

According to an authority on the matter, the “worst case scenario” for most renters-turned-buyers breaking a lease agreement is often that they’ll need to pay an early termination fee to break their agreement early. This can be as little as one month’s rent to “a few month’s rent” depending on the situation.

At the very least, this is better than being forced to pay every month for the remainder of your term.

In the end, it’s important for you to understand that you should not let anything get in the way of buying the home you’ve always wanted – even if you’re currently living in an apartment with an active lease agreement.

You just need to know as much about the specifics of that agreement as possible so that you can move into your new home while mitigating as much risk as possible for both yourself and your landlord at the same time.

It’s wise to consult with your trusted real estate professional about the implications of your specific situation.