Getting started with rental properties can be a bit of a challenge, but there are ways, known as house hacking, to get started without having to wait ten years.
If I had to start over, one of the easiest ways would be to buy a suited property for my own personal residence. In a perfect scenario I’d rent the upper suite if it was up/down and live in the basement to maximize cash flow.
Operating like this would provide two huge benefits.
As a personal residence I wouldn’t have to put as much down on the property and I could leverage my money better, plus start sooner.
Additionally, with the upper likely covering the majority of not all of my mortgage I’d be able to either increase mortgage pay down to the maximum amount during the first years of owning the property, or quickly build up a new down payment for a second property within a few years.
I’d simply rinse and repeat with another suited property and move there as my primary residence and jump from a single rental to three rental doors with my next purchase.
But that’s not the only way to do some creative house hacking.
House Hacking – BRRR
Another option would be the BRRR strategy or Buy, Renovate, Rent Refinance tactic.
You buy a rundown property at a low price, you renovate it to increase it’s value and then you have the option to refinance it up to the current value and rent it out as an investment property. You could simply sell it and use the increased value as a downpayment on your next property. Or you could simply rent it out.
If you’re moving into it as your primary residence and renovating it while you live there you can even take advantage of additional tax benefits and simply rinse and repeat every couple of years until you find yourself with a portfolio of properties if you simply hang on to them, or a completely paid off property if you just carry the money over to each subsequent purchase.
The Beauty Of Real Estate
That’s the beautiful thing about Real Estate. There is not just one way to make money.
Whether it’s house hacking, fixing and flipping, simply buying and holding or just paying off your traditional mortgage over 25 years, in the long run you simply make money from Real Estate.
Hi Bill,
You asked for some feedback on the House Hacking article.
When a person does as you suggest, (renting the main floor and living in the basement) it is possible to avoid the Alberta Residential Tenancy Act entirely. Specifically,
“This Agreement is exempt from the Alberta Residential Tenancies Act, which states:
“2(2) c) This Act does not apply to rooms in the living quarters of the landlord.”
I have tested this several times when evicting a “Houseguest” who legally is NOT a
“Tenant”. In fact, the “Houseguest” has absolutely no legal rights whatsoever.
Of course, this requires that the “Houseguest” has access to a “Shared” kitchen. You can have your second and private kitchen in the basement.
If you would like to ask, I will elaborate on my experience.
Thanks for the feedback Abba, and you’re absolutely correct for Alberta. There are loopholes there as well and it makes having a solid lease even more important to protect you.
However every landlord reading this needs to understand their local rules and we have landlords from all over North America and even overseas reading this and the rules vary significantly from place to place which is why it’s important for landlords to know their own rules. So kudos to you for knowing yours!
Bill