If you stumble upon a fourplex for sale, we say go for it. It is the answer to what kind of home is best for house hacking. House hacking is one of the best real estate investment strategies for beginners because an investor can live for free and earn a rental income on top. Additionally, owner occupied multi family properties are easy to manage and are just generally a great start to a real estate investment portfolio.
Keep reading to learn more about this strategy as well as how to house hack a fourplex.
What Is House Hacking?
House hacking is when you own an investment property, use it as a primary residence, and rent out parts of it (when it’s an apartment or a single family home) or separate units (when it’s a multi family home). This essentially means you live for free – the rental income should cover the monthly mortgage payments.
It is a great way to start real estate investing because:
- When not paying rent yourself, you are not just saving money but can pay back your loan faster using any extra income that would have otherwise gone towards housing costs. So house hacking is great for anyone who is debt-averse.
- You can enjoy upgrades to your home that tenants will help pay for. For example, if you install a pool in your fourplex backyard, you can raise the rent a bit.
- You can eventually move out of the rental property and earn even more income every month.
Related: Wondering How to Live Rent Free? House Hack in These 7 Cities
What Are the Benefits of Buying a Fourplex to House Hack?
Why is a fourplex perfect for house hacking? There are a few different reasons.
- The price to rent ratio is usually very good, meaning fourplexes are usually positive cash flow properties.
- It might be easier finding one building that fits your real estate investing goals than 4 different investment properties for sale with similar potential. Four real estate deals also mean a lot more effort and paperwork and higher closing costs and agent fees. Also, recurring expenses like taxes and maintenance are not four times higher for a fourplex compared to a single family house. Real estate analysis software like Mashvisor can give you reliable estimates on expenses for properties across the US so you can see for yourself.
- A fourplex is the largest small multi family property that will help you pull off the house hacking strategy and allow you to earn a lot more rental income than if you went for a single family, duplex, or triplex.
- It is very unlikely that you will have more than one vacant unit at a time.
Buying a Fourplex and Hacking It
Let’s break down this strategy into three main components:
- Financing a fourplex
- Finding and analyzing it
- House hacking it
Financing a Fourplex
As a beginner real estate investor, you are probably wondering how to invest in real estate with no money. The good news is that a fourplex is actually a very affordable investment.
A fourplex is the largest type of property you can buy with an FHA loan. FHA loans are backed by the Federal Government. Lending institutions are more willing to give out such loans because they are protected in case you default. The terms are also better than conventional mortgages: a low down payment of only 3.5% compared to the usual 20%. And you can only qualify if you will be living on the property you are buying with the loan so it is perfect for house hacking. So how to buy a multi family property with no money does not seem like much of a problem, right?
Finding and Analyzing a Fourplex for Sale
While there are a few different ways to find a fourplex for sale to house hack, we’ll skip them and focus on the best way. Visit Mashvisor now and start your search for a profitable fourplex.
Before buying a fourplex, you should do rental property analysis on shortlisted properties. Mashvisor’s property analysis takes market data about rental prices, Airbnb occupancy rates, and demand to calculate the expected returns on investment and help you figure out what is the optimal renting strategy (Airbnb or traditional renting) for each one. From there, you can make an informed decision based on data on how to rent out your fourplex. The analysis can also calculate different scenarios for financing the purchase so you see how the whole thing will play out.
To start analyzing multi family homes for sale with Mashvisor, click here.
House Hacking Your New Fourplex
Now that you’ve gone through with buying a fourplex, it’s time to rent it out. Let’s look at the two routes you can take:
Airbnb rental property
If you decide to go with Airbnb, here is what you need to know.
An owner occupied multi family building is simply great to start an Airbnb business. For one, using the home as a primary residence may mean you can legally operate an Airbnb in locations where other real estate investors cannot. When you live on-site, it is really easy to manage the Airbnb yourself – checking guests in and out, cleaning, and restocking supplies. Doing the laundry at home will even save you money on another washer and dryer! You can also control if guests follow house rules, which means zero problems with neighbors and authorities.
А few tips:
- Decorate each unit differently to attract different people through the photos on the Airbnb listing. It can be different styles altogether or just three variations on a theme.
- If possible, prepare the three units for a different number of guests so you are more competitive.
- Offer pickup from the airport on-demand and flexible check-in times – since you live on-site, it should be no trouble.
- Prepare maps and recommendations for places to see, to eat in, and so on. Tourists will enjoy taking advice from a local.
- Order supplies in bulk online and get them delivered to your door to save both time and money. This means bed linen for your own home, too!
- If you make a local specialty or practice an artisanal craft, use it as a way to connect with your guests and make their stay even more enjoyable. A jar of jam can earn you lots of positive reviews and more guests.
- If some guests are really outgoing and interested in local life, invite them to a barbecue party you are throwing in the yard or drive them to the farmer’s market. This also earns bonus points.
- Have boundaries in place so guests don’t overstep your own privacy and comfort. For example, put up a note on your door asking not to be disturbed between 11 pm and 7 am.
Related: 8 Airbnb Property Management Tips for New Hosts
Long term rental property
When house hacking a fourplex, you could choose to rent out the other units to long term tenants.
If you decide to go for traditional long term renting, you will enjoy a more carefree way of making money in real estate. If you choose your tenants carefully, you won’t have any problems for years to come. Here are a few ways to make your fourplex comfortable for everyone, including yourself. House hacking does not mean you have to feel like you live in a college dorm.
- Check the monthly rates for similar rental properties on Mashvisor to price yours competitively.
- Decide on the ideal tenant profile (e.g. families with up to 2 kids, no college students) and maximum occupants per unit to avoid tension.
- Provide absolutely separate entrances for all units so everybody is independent.
- Soundproof the walls.
- Make sure every unit gets separate utility bills.
- If you are doing property management yourself like lawn mowing, factor your time in the rental price.
- If possible, divide the yard so everyone gets their plot where they can do as they please. If not, make sure the ground floor units get a fence or at least high greenery for more privacy.
- Give the exterior of the building a unified look – maybe paint the front doors in complementary colors or put one kind of potted plant to bring it all together.
- Discuss upgrades with each unit’s tenants individually to meet their needs.
Most importantly, you might be the landlord, but try to keep things friendlier because you are also neighbors. Your tenant should also enjoy living in your fourplex so you should be considerate and not throw parties every night.
Related: Rental Property Management Tips for Landlords
In Conclusion
House hacking a fourplex is a great real estate investment. It provides you with home security while paying for itself.