Getting Starting in House Hacking: Austin’s Story

Summary

In this episode, Austin (me) talks about his experience house hacking twice before he turned 23!

He dives into his experience, first, buying a triplex and then a duplex.

We will go over everything from finding a multi-unit, financing a deal, how to run the numbers so you know you have a good deal, and some simple tips to make your life even easier!

Links

Read All of Austin’s Tips Here: The Ultimate Guide to House Hacking

Full Transcript:

Adam Grim:

Today we’re going to talk about house hacking. If you’ve been listening to show for a while, you know we did a house hacking episode a while back and we’ll link to that in the show notes. In that episode, we covered Austin’s story and the way Austin has approached house hacking in the past and some quick tips. But today we’re going to do a much deeper dive. Austin just has a wealth of knowledge in house hacking and how people can really change their life through this new and unusual real estate tip. So Austin, let’s dive right in. Can you tell me a little bit. When you think about house hacking, well, first give me a quick example in case somebody hasn’t heard the previous episode.

Austin Glanzer:

Yeah. So first of all, I don’t know if I have a wealth of knowledge of house hacking, but I have done it twice. And we’ve done it well and we’re cash flowing, which is awesome. But yeah, really just to explain what house hacking is, it is whenever you buy a multiunit and you’re going to live in one of the units and then you rent out the other ones. So the goal is to cover your entire mortgage payment with the rent that you’re going to collect on that property. So really, you can do this with one, well, you can do it with a duplex or you can do it all the way up to a fourplex.

Adam Grim:

Gotcha. So you purchase the property with a set number of units, and if I understand it correctly, you live in one side and then you rent out the remainder of the units. Is that right?

Austin Glanzer:

Yes. So what we did for our first one was we bought a triplex. We lived in one of the units and we rent out two of them. So we were able to cover our entire mortgage payment by renting out two of the units. And we were able to live for free in the third unit.

Adam Grim:

Gotcha. So who is this a great fit for? If people are interested in house hacking, are there some guidelines for who can do it, who shouldn’t do it, things like that?

Austin Glanzer:

Yeah, absolutely. So if I would say for most people who want to house hack, it is going to be for the people who kind of want to invest in real estate, want to buy their first home, maybe have a little bit of money saved up, and they want to get into the experience of owning some rentals. So maybe they want to buy some rentals when they grow up, so to say. So I would say mid-20s, first time home buyers, this is a great option for you to basically cover all of your house payments and live for free and pay down your mortgage. So I would say early 20s, maybe newly married, not married, and looking for your first home.

Adam Grim:

Gotcha. I imagine there has to be some level of credit worthiness, right? Or am I wrong? I mean, you’d have to qualify for enough to purchase a multiunit place, right?

Austin Glanzer:

Yep. Well, here’s the beauty of house hacking. So if you buy a multiunit that is four or less units, okay? So you can buy up to four units where it is considered the same exact as a residential home. So you can get all of the residential loans or the benefits of a residential loan and buy up to a fourplex. Once you get larger than four, you’re going to have to start looking into more commercial loans. And the regulations are different if it’s higher than four. But four or less, it is the same exact as if you were buying a single family home.

Adam Grim:

Wow. So you can purchase this with a conventional loan, go out there and get your one to four unit property. Then let’s walk through the process a little bit. So that’s great. So let’s say I’m ready to buy my house. I want to go with the house I can route so I can save on just monthly expenses, cash flow, et cetera. Where do I start? What’s the very first step I’m going to do if I want to go out there and do some house hacking today?

Austin Glanzer:

The very first thing I would do is find somebody who has house hacked and talk to them about their experience. So I would just go onto Facebook and first post on your status, see if you’re friends with anybody who’s done it. And then also, you can look up real estate investors near you on Facebook. And there’s probably a group in your state or in your city or your county of people who want to invest in real estate. And you can ask if anybody’s house hacked, and if you could either schedule a phone call or get coffee with them. I would do that first is get to know someone who’s done it so you can get some insights.

Adam Grim:

Gotcha. So we’re going to talk to somebody and get some insights. So we’ll sort of fake that conversation here. Since you’ve done it a couple times, let’s say I’m interested. So if I sit down, we have coffee. What do you tell me first I should do? What is the first step I should do if you were sitting down and you’re advising a young interested house hacker?

Austin Glanzer:

Yep. So I would first ask them what their end goal is. So if you’re going to want to get into house hacking, I think it’s important for you to really think about what type of lifestyle you want. So let’s say, for example, you’re like, “Hey, I want to get into house hacking. I have a really good corporate job, it requires a lot of time, I just want to kind of invest my money in different ways. But I don’t have enough time to basically manage multiple units.” Well, I would say then maybe just buy a duplex. Okay? Just get something that is nice that you can rent out one unit and live in the other. You only have to manage one side. Maybe you’re not going to cover your whole monthly payment, but you’ll be able to cover a lot of it.

Austin Glanzer:

So if you’re really vested in a career, I would say maybe don’t buy a fourplex at first. But if you are like, “Hey, I’m all in. I’m willing to spend a lot of time on this. I’m willing to just basically create time in my schedule outside of my job to make sure all the units are good and I can work with my tenants.” I would say look at something larger like a triplex or a fourplex because it does take some time to do this. So I would first look at your end goal of what do you want your life to look like if you house hack.

Adam Grim:

Gotcha. We got the goal in mind. And then I’m assuming the next step we’re going to do once I’ve identified what type of property I’m looking at is to start shopping for properties. Is that the next step?

Austin Glanzer:

Yeah. I mean, I would say familiarize yourself with your area. So you can do this as easy as just going on to Zillow, actually, not Zillow. I would say realtor.com because realtor.com has a multi-unit filter where you can look at all the multi-units that have sold in your area. So I would filter all multi-units that have sold in your county and get an idea for what the price ranges are. Because it is kind of hard to tell sometimes with a multi-unit what’s a good deal or not if you’re new. Because you’ll see one that sold for $400,000, and then you’ll see one that sold for $200,000. And both duplexes. Why is one so much more than the other? So you’ve got to understand what street it’s on, how can you rent? How come rent is so much more in this unit than the other unit? So I would go through realtor.com, as simple as that, filter sold multi-units in the past year in your county to get an idea of what a good deal would be on a multi-unit.

Adam Grim:

Gotcha. Cool. So we set our goals, we’ve done some research. Now, when it actually comes to selecting properties, are there things you’d recommend people look for or watch out for when they are trying to find their first house hacking unit?

Austin Glanzer:

Yeah. So one of the biggest things that people forget or don’t even know when they first want to start house hacking is if you do a normal loan, if you do an FHA or you do a conventional loan with 5% down, which is what most people want to do, they want to put little money down to acquire the property, you have to live in the property for one full year. So the problem that a lot of people experience is maybe they’ll see a good deal on a multiunit, but all of them are rented out. You’re going to have to kick somebody out of that unit to live in it because you have to live in it for one year.

Austin Glanzer:

So if you want to make your life to be really easy, you want to find a multiunit with a vacant unit in it that you can move into for a full year and live there. And then you can move out and rent it out and create a full cash flowing property. So that’s something that a lot of people don’t think about and it can be pretty difficult to kick somebody out right when you buy the house. So a lot of people don’t like doing that.

Adam Grim:

All right. So that makes a lot of sense. So I do have a question too, when we’re identifying a property, is it ever worthwhile to find a bigger home or something like that and retrofit it and turn it into a multiunit? Or would you recommend just trying to find a property right out of the gate that has a couple units already there?

Austin Glanzer:

Yeah. So if you’re brand new and this is your first thing you want to do, I would highly suggest just buying a multiunit and not converting a single bigger house into a multiunit because there’s so much zoning that has to go into actually changing a residential home into a multiunit home that just when you’re new, it’s going to be really difficult to get all the plans done, to get the city to approve it. And not necessarily that it’s crazy hard to do that, it’s just so new if you’ve never done it before. So I would suggest making sure that you just buy a multiunit that’s already zoned multiunit. And you can just move in.

Austin Glanzer:

And maybe I would buy something, especially if you’re new, I would still buy something that maybe is outdated where you can do some pretty easy fixes to it. Paint, maybe paint cabinets, replace some floor just to make the house nice. I probably wouldn’t buy anything that is crazy rundown that you have to redo the whole thing. Just especially when you’re new. If you’ve done some stuff, maybe buy something that’s a little bit more rundown. But I would say buy something you can paint, put some sweat equity into it, and just start cash flowing.

Adam Grim:

Nice. So find something that needs a little bit, some cosmetic fixes. We’ll get in there, increase the equity a bit, and find one that hopefully has at least one of the units unoccupied. Do you try to find a unit that has the rest of the units occupied? If we’re buying a three or four unit property, do you ideally want to see two to three of those occupied?

Austin Glanzer:

Yeah. I mean, the most ideal situation is if you bought a fourplex, three of them are rented, and one of them is vacant. I mean, that’s the most ideal thing because then you’re already collecting rent. You can just move right in. It works out great. But it’s not the worst thing if you buy a triplex and one of them is rented, two of them are vacant. And you got to put a new tenant in there because if it is vacant, it’ll be really easy for you to maybe spend one month to put new carpet in and paint it and then get a new tenant for a higher rent. So if it is vacant, I think it is kind of an opportunity for you to make it nicer and increase the rent.

Adam Grim:

And just where the market is right now, the economy, are you finding any difficulty finding tenants for properties or has that been a pretty easy process?

Austin Glanzer:

Actually, with COVID, it has been crazy easy to find tenants because the units, there’s just less units, at least in our area. So whenever I posted my house on Zillow for a tenant, I got a tenant within 24 hours. And it was a good tenant. She works at the hospital, has a really good paying job, and I locked her in within 24 hours. It was awesome.

Adam Grim:

Nice. That makes sense. That’s very cool. You sort of alluded to this, but what steps do you recommend if you’re going to promote your property? You said about putting it on Zillow. Is there anything else you do to try to find tenants for your properties?

Austin Glanzer:

For me personally, the easiest thing is Zillow. You can post your property for free, put your own photos on there, put the details and everything. You don’t have to be a realtor to do it. You just put your property up there that is for rent. And you’re kind of wondering like, “Well, why does Zillow let you do it for free?” Well, they have their own application. So let’s say that someone’s interested in my property that I posted. What they have to do is they have to fill out the Zillow application. And Zillow charges them $25 to even apply to move into your property. And what’s great about it is Zillow makes their money, but then they send you this person’s credit score, their criminal background history, and their current employment. So you get all that information from Zillow. So Zillow makes money off the tenant and it’s free for you.

Adam Grim:

Wow. That sounds incredibly easy. That’s fantastic.

Austin Glanzer:

Yeah. And honestly, Zillow owns such a huge market because they also own HotPads and Trulia. So when you post something on Zillow, it also goes on the HotPads and Trulia. And I mean, that’s 90% of the market that people look for on a unit. So honestly, that’s all I’ve done. I’ve just posted it on Zillow and I’ve always gotten a tenant from it.

Adam Grim:

Wow. That’s perfect. Now switching to the management side of things, for those that have never had a renter, sometimes that can sound a little bit challenging. Can you tell me a little bit or any tips you have for just managing tenants in your rental unit?

Austin Glanzer:

Yep. So I have managed my own units this whole time. I’m actually going to get a manager here soon just because I’m doing more stuff in my business. But it has not been that bad. I’ve definitely had some bad tenants. Don’t get me wrong. Like where we got into arguments about stuff and whatnot. So I’ve had my share of that. But it has not been that bad because I use a program called Cozy. So it’s just cozy.co. Cozy.co.com. Not .com. It’s cozy.co. I always want to say .com after that.

Austin Glanzer:

But it’s a great management software that you share with your tenants where they can pay you with direct deposit on there, they can fill out if they need anything fixed. And then right in that, you get all these messages. Like something needs to be fixed, they message you. And then you can send that message to a contractor in the area to go and fix whatever the issue is. So it really has not been that much time for me to do this. I would say maybe on a bad month, four hours a month that I have to work on it. So it really is not too much work, especially when you have nicer units. I fixed mine up. So the tenants aren’t complaining about problems.

Adam Grim:

And then do you recommend having somebody like a handyman or something on call? If you have problems with your units, do you just take care of them yourself? How do you handle the mechanical maintenance side of things?

Austin Glanzer:

Yeah. I’m pretty lazy, to be honest. I don’t really fix anything myself. I always just send somebody in. And I’ve just gotten connected with a really great local small property that does small fixes. Their business is known just to kind of fix small things for tenants. So if the tenant has a leaky faucet, they come in and do that. So I have their phone number and they arrive within 24 hours. And they have very reasonable prices. So if my tenant needs something, I honestly actually just tell my tenant to call them directly. And then that company bills me. So sometimes I don’t even get a phone call.

Actually, I know for a fact I don’t get a phone call because I paid a $75 bill yesterday for something I didn’t even know that they went to go fix. So my tenant just reached out to them directly, which was awesome. I was totally happy to pay $75 to have them fix this. I can’t even remember what it was. It was something small. But I didn’t even get bothered with it. So it was great.

Adam Grim:

Yeah, so total hands-off. That’s awesome. All right, so that’s a step. So you’ve set your goals, you’ve done your research, hopefully you’ve found a property. This is a lot of valuable info. So we’re rolling along here. Now, to get a little more on the technical side of things, you’ve talked in past episodes about the BRRRR Method, where you can kind of sort of grow your portfolio. Could you use your house hacking property to do this, to build some equity and leverage that? Or does that not apply here?

Austin Glanzer:

Yeah, you totally could. I have not done this for my units, but I could. So basically, if you buy a multiunit and you fix it up and you live in it, what you can do is you can increase the rents over time and then you rehabbed it, you rented it out. And then you can actually refinance your multiunit for whatever the new value is either over time, just because it’s gone up in value, or you fixed it up. And then you can use the money that you refinance to buy another multiunit. So I actually am in the process on a duplex that we bought that I didn’t house hack in, but we are refinancing it right now to get out of the hard money loan. And then we can use the funds from the refinance into buying another property. So my business partner and I, we actually looked at a property last night, just a small, simple unit to rent.

Adam Grim:

I feel like we’ve covered the core basics there. Anything else we didn’t cover that people should know about before they dive into the world of house hacking?

Austin Glanzer:

Yeah. I mean, I would say just look into an FHA loan. You’ll hear mixed advice about this because with an FHA, you do have to pay mortgage insurance. But if you can only put 3.5% down to acquire a multiunit and your tenants are paying over the mortgage amount, I mean, it doesn’t really matter if you’re paying $80 more for mortgage insurance because the tenant’s paying for it. So that’s how I did my first one. And then my second one, I did 5% down with a conventional loan where I don’t pay mortgage insurance. And I’m currently living in my duplex and I can actually just tell you the numbers. I pay $1,080 a month for it. And I just have a really small unit below and I get $650 a month. And I’m okay with it not covering my total payment because I’m living in the top unit right now. So it’s saving me $650 a month off my mortgage payment. And my other unit’s now fully rented so I’m able to cover my extra whatever that is, $350, with the unit I moved out of. So I’m still living for free. It’s awesome.

Adam Grim:

That’s a great story. So you might’ve noticed the podcast is living in a new home. It’s living at realestatejumpstart.com. Again, that’s realestatejumpstart.com. So to see the show notes for this episode, head over to realestatejumpstart.com. We’re also putting together a bunch of resources. Videos, an ultimate guide to house hacking. So if Austin’s inspired you, some of the tips here, please head over there, check out the resource we’re going to have. We’re going to make this really easy for you. I think it’s a fantastic way to get started just to really be smarter about your finances, just to have more cashflow coming in, to start moving into the investment world, et cetera. So again, realestatejumpstart.com. Check it out. Austin, any other resources that you recommend people check out before they get into real estate hacking, house hacking?

Austin Glanzer:

Yeah. I mean, I have a bunch of stuff on my social media accounts that I’ve made videos before. So you can check those out. And I have those in the show notes. And BiggerPockets. I mean, they are great. They’re always pumping out information. They probably have 100 episodes just on house hacking as well. So check them out too. I would say they have great, great knowledge and information they can give you. And I guess lastly, I would say this is just kind of a more basic thing, but read the book Rich Dad, Poor Dad. It’s not about house hacking, but it is about your mindset with money, buying assets and not liabilities. And buying a multiunit is buying an asset. So I would read that book just for some very basic stuff about money.

Adam Grim:

Gotcha. Well, thanks, Austin. I appreciate you doing the deep dive. This is fascinating stuff. Everybody stay tuned. The next couple weeks, we’re going to have some interesting guests on the show diving into a variety of different topics on the business side of real estate, the marketing side of real estate, et cetera. So thanks for listening, and we’ll catch up with you next week.

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